Traders on the NYSE, May 3, 2021.
It’s not nearly earnings anymore: Dividends and heavy shopping for of exchange-traded funds are serving to shares energy ahead.
April buying and selling information is in, and it exhibits two surprises: a rise in dividends and big inflows into equities which can be even stronger than the primary three months of the 12 months.
In April 2020, two dozen firms within the S&P 500 diminished or suspended their dividends. More suspensions and dividends got here later within the 12 months.
For April 2021, the alternative occurred: 33 firms within the S&P 500 introduced dividend will increase. None introduced a lower, and none suspended dividends.
Most importantly, 10 firms that had suspended dividends in 2020 started paying once more in April:
HCA Health Care
Universal Health Services
Three of them — TJX, HCA Healthcare and Freeport McMoRan — are paying higher dividends than they had been earlier than they suspended funds.
“The bottom line is, a year ago companies had no idea what was going on,” mentioned Howard Silverblatt, senior index analyst from S&P Global Indices. “Now there is much better clarity, and they are willing to put their money where their mouth is.”
Will it proceed? Silverblatt estimates that the general dividend payout for the S&P 500 will improve 5% in 2021.
That would imply a payout to traders of about $515 billion, up from $483 billion in 2020.
“That is money in your pocket,” Silverblatt mentioned advised me. “Remember, when a company pays a dividend, it is expected that it will keep that dividend going. That is a commitment from the company, and they don’t make that decision lightly.”
Near-record inflows into ESG, thematic tech and different areas are also supporting prices.
ETFs began the 12 months simply wanting $6 trillion in belongings below administration, and inflows have continued on a constant foundation each month in 2021.
According to ETF Trends, traders spent an additional $55 billion on equity-based ETFs in April, for a year-to-date whole of $258 billion. 2021 will definitely see a lot higher equity inflows than 2020, when panicked traders threw cash into bond funds.
“The money’s coming from everywhere,” mentioned Harry Whitton, senior vice chairman at Old Mission, an ETF market maker. “There are people still sitting at home who are putting money into the markets. You are seeing huge interest in [Environmental, Social and Governance] ETFs. You are continuing to see money come out of mutual funds and into ETFs as well.”
These inflows got here regardless of a 30% drop in April fairness share buying and selling volumes from March, based on PiperSandler, and the same 14% drop in fairness choices buying and selling.
Why are there big inflows into ETF fairness funds, and decrease general fairness and fairness choice buying and selling?
Nikolaos Panigirtzoglou, managing director at JPMorgan Chase, suggests retail merchants are altering their buying and selling patterns: “The behavior of US retail investors appears to be changing again, away from buying individual stocks or stock options and towards buying more traditional equity funds as was the case before the pandemic,” he wrote in a latest be aware to shoppers.
Whitton agrees: “We are seeing selling of fixed income ETFs and buying of equity ETFs. Maybe some of the Reddit crowd turned into long-term investors. Or they got their tax bills.”
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