More and more companies with weaker credit quality in the investment-grade segment are cutting their dividends to prevent a downgrade into the high-yield segment. However, this shift offers exciting opportunities for active investors. Learn more in this Spotlight!
Dividend Cuts Over Time
In addition to significant dividend cuts, divestitures of business units or capital increases have been announced or already implemented with the clear intention of strengthening the company’s balance sheet.
As early as 2023, companies with lower credit ratings in the EUR investment-grade universe implemented substantial dividend cuts (at least 50% compared to the previous year). Specifically, 7% of companies rated BBB or lower cut their dividends. This represents nearly a doubling compared to the previous year. Based on analyst expectations and corporate announcements, further substantial dividend cuts are expected to follow in 2024.
Closing Words
Risks
Price losses due to rising yields and/or increased risk premiums are possible. Even a total loss cannot be ruled out. Past performance is not indicative of future results, nor can future performance be guaranteed.
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