Dividend payments have become more uncertain during the current pandemic-induced economic stress. Against this backdrop, companies are reassessing their ability to make payouts and certain regulators are urging the financial sector to suspend dividend payments. However, over time, earnings and dividend payments should return to pre-crisis levels and companies with strong market positions, managements and financial structures should likely generate the best future returns.
The economic decline induced by the current pandemic is proving to be so damaging to the prospects of some companies and earnings that it is precluding dividend payouts from such companies. As a reaction to this, there has been net selling of products with dividend factor exposures (Figure 1).