[anon125]

What usually happens to dividends if there is a market crash this year?
Thanks

 

[AltaRed]

Distribution payout will depend on the income generated by the underlying securities. For example, the distribution payout of XIU will depend on how well the 60 stocks that are in XIU hold their individual dividend payouts.

It is almost a certainty that a significant and lengthy downturn would cause some stocks to cut dividends and that would be reflected in the distribution payout of the ETF. The joy is the diversification of the ETF will temper effect of cuts by any one or a few of the stocks in the ETF.

 

[james4beach]

What usually happens to dividends if there is a market crash this year?
Thanks

I think the most general answer is that in a brief crash (and quick recovery) there may be no change to dividends. However, if stocks have a long-lasting period of weakness (a long bear market) it's possible to see dividend reductions

The reason is that both dividends, and stock prices, are based on the same thing... healthy business operation. If the business encounters trouble (like in a recession) both share price and dividend can fall.

As @AltaRed says, this is where diversification is important. A diversified portfolio of stocks would smooth out any dividend cuts.

But yeah, dividends can reduce during a prolonged market crash. It all depends on the health of the companies. Whatever dividend ETF you choose, make sure it holds large companies in good financial condition, and make sure the ETF diversifies between many sectors. Sometimes a recession will nail one sector very hard, but other sectors will do OK.

 

[Beaver101]

My 1c ... if there is a market crash that impacts a dividend ETF so severely such that there's no output (and by that I mean zero output), then I would have cashed out. EOM.

 

[AltaRed]

We have no idea what kind of ETF the OP is talking about firstly, nor does the OP appear to recognize that an ETF does not pay dividends. They pay out income (cash) generation from the underlying securities in the form of distributions of various types of income depending on the nature of the underlying securities.

 

[Beaver101]

^ I think it's a lingo problem where dividends and distributions get mixed up 'cause ETFs are made up of stocks. For the most part, we all got what he meant or made some applicable assumptions when answering.

 

[AltaRed]

Post #5 was meant to be a learning lesson for the benefit of the OP. Free knowledge in 60 seconds rather than minutes or hours googling for and reading more complicated explanations of the some of the mechanics.

 

[Beaver101]

^ Agree

 

[anon125]

Thanks everyone
Where do i click to get emails when you experts reply?

 

[Beaver101]

Thanks everyone
Where do i click to get emails when you experts reply?

... I'm not sure about you getting an instant "email" when someone replied to your "post". But you do get an alert under your avatar (or sign on/off, upper right hand corner) when someone replied to your post under "Alerts".

 

[cainvest]

Thanks everyone
Where do i click to get emails when you experts reply?

Look in your Account settings -> Preferences ... some options there for emails.

 

[james4beach]

I found some data I previously collected on CDZ, which is a well diversified Canadian dividend ETF.

Through the 2008-2009 crisis, dividends remained quite stable. As you can see, there are some fluctuations along the way. So there are definitely times when dividends reduce somewhat. So far (for CDZ and XIU as well) there have not been any particularly large dividend reductions.

You also have to keep in mind though, that those ETFs also distribute capital gains. Those aren't dividends. This chart for CDZ shows only the eligible dividend portion, and excludes the capital gains.