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Investors turn to short and leveraged ETPs as dividend payments disappear

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Investors turn to short and leveraged ETPs as dividend payments disappear

New analysis (1) from ETF provider GraniteShares, which offers a range of 3x short and 3x leveraged ETPs on popular UK and US stocks, has revealed that between 1 January 2020 and 23 November, a staggering 493 companies listed on London Stock Exchange (LSE) have cancelled, cut, or suspended dividend payments. 

This represents a 10.8 per cent increase when compared to the period 1 January to 24 July 2020.

No segment of the market has been immune, 51 FTSE 100 companies, 115 FTSE 250 companies, and 149 AIM-listed companies have cut, suspended or cancelled dividends in 2020.

Will Rhind, Founder and CEO at GraniteShares, says: “Dividends and dividend growth play a very important role helping investors achieve sustainable income and long-term returns, and they are more important than ever now that interest rates are so low.

“The expected slowdown in GDP in the UK and in many other countries in the fourth quarter means that companies may be under additional pressure to preserve cash, which could put further pressure on dividends. It is likely that investors will face a long wait until they see dividends return to their pre-Covid levels.

“With this in mind and against a backdrop of increased market volatility, we are seeing a significant rise in sophisticated investors and professional investors making greater use of shorting and leveraged investment strategies with a view to boosting returns. For example, the average daily volumes in these products were 123 per cent higher in October than in September.

“Interestingly, our ETPs track total return indices that incorporate the dividend, multiplied by the leverage factor, into the index return. Among the UK names tracked by the ETPs, AstraZeneca, BAE Systems, BP, Diageo, Rio Tinto, Royal Dutch Shell, Vodafone are still paying dividends.”

GraniteShares has a number single stock 3x leveraged and 3x short ETPs listed on the London Stock Exchange. They cover a selection of FTSE 100 companies and popular US tech stocks.

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