Capturing dividends

Implied dividend swap levels for the DJ Eurostoxx 50 index over the next three years remain historically cheap. Will corporate dividend payouts and earnings results provide a basis for a more rapid recovery, and give structured products investors a chance to capitalise on current priced-in expectations by playing dividend trades? Matt Cameron reports

Until recently, the most formidable fall in implied dividend levels was 55% after the Wall Street Crash in 1929. Compare this to the DJ Eurostoxx 50's 2010 implied dividend swap levels (future levels of expected dividend yields) against 2008 realised dividends (those actually paid out). The drop is a phenomenal 65%, a record figure that has led many structured products participants to view the dividend space as a bargain market in which investors can capitalise on underpriced, long-term