The “Cares Act” specifies that any companies that borrow from the U.S. government may not buy back shares of their stock or pay dividends to shareholders for at least one year after the loan is repaid.
“While this is a taxpayer-friendly approach to provide support to businesses in need, it is also a reminder for investors to look inside their dividend fund to understand what they have exposure to,” said CFRA’s head of ETF and mutual fund research, Todd Rosenbluth, in an analysis out Thursday.
CFRA expects companies in the travel sector, such as hotels, resort operators and cruise lines, to see a negative impact from the COVID-19 outbreak, while supermarkets, providers of household products, and biotechnology and pharmaceutical companies will benefit.
As a reminder that the coronavirus isn’t the only headwind weighing on financial markets, CFRA noted that companies tied to oil-and-gas equipment and services and exploration and production will be negatively impacted by the global oil price war.
Rosenbluth examined two popular exchange-traded funds to highlight what differences in portfolio composition might mean for dividends. The First Trust Value Line Dividend Index ETF