Industry Updates

Global income ETF sees over $1bn outflows last week amid ongoing dividend cut concerns

Vanguard's FTSE All-World High Dividend Yield UCITS ETF (VHYL) saw the most outflows across all European-listed ETFs in the week to 24 July

Tom Eckett

a boat in the water

Investors yanked over half the assets from Vanguard’s global high dividend yield ETF last week amid ongoing uncertainty surrounding dividend cuts and suspensions following the coronavirus turmoil.

According to data from Ultumus, the Vanguard FTSE All-World High Dividend Yield UCITS ETF (VHYL) saw $1.2bn outflows in the week to 24 July, the most across all European-listed ETFs, taking its total AUM to $1.1bn.

Tracking the FTSE All-World High Dividend Yield index, VHYL offers investors exposure to 1,651 large and mid-cap companies that pay higher-than-average dividends.

The outflows highlight European investors are still concerned about the outlook for dividend-paying companies.

In the UK, for example, dividend cuts and suspensions reached £30bn in May since the coronavirus turmoil as companies looked to shore up capital to weather the storm.

Furthermore, with a number of countries such as Spain going back into lockdown, there remains the risk of a second wave impacting the V-shaped recovery.

Vanguard said in a statement: “In June, we have seen some investors turn away from dividends entirely, in the face of continued uncertainty. This is in line with similar patterns across the sector.

“Vanguard is a long standing advocate of a ‘total return’ approach to investing for income-focused investors. If by not paying a dividend in the short term it benefits a company’s long-term share price or allows it to stay solvent through the crisis, investors may still be better off over the long run.”

Physical vs synthetic UK income ETFs during the coronavirus volatility

VHYL has significantly underperformed wider equity benchmarks in 2020. According to Bloomberg, VHYL has returned -17.1% so far this year, as of 30 July, versus -0.1% for the Vanguard FTSE All-World UCITS ETF (VWRL).

Featured in this article

Logo for VanguardLogo for Ultumus