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For Professional Clients and, in Switzerland, for Qualified Investors only. In Israel for Sophisticated Investors only.
English
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© 2020. BNY Mellon Investment Management EMEA Limited. All rights reserved.
IDEAS AND KNOWLEDGE TO INSPIRE YOUR INVESTMENTS THINKING
28 May 2020

Weighing the income conundrum

The economic challenge currently faced by companies is immense and greater than at any time since World War II. Many firms have switched from maximising shareholder value through share buybacks and dividends, to focus on keeping their businesses alive as they react to significant drops in cash flow. In our view, not all companies will be successful in doing so.

 

For investors, the collapse in dividend pay-outs could refocus their attention on bond income, which is contractual and therefore more stable. The economic uncertainty has raised the potential for bond downgrades and defaults, but has raised the yield available on a broad universe of corporate bonds, thereby improving the income stream in the future.

 

Another element of behavioural change is the potential for companies and investors to have a higher level of savings in the future to combat the uncertainty as the Covid-19 coronavirus takes time to dissipate.

 

Paul Brain, investment leader fixed income team, Newton Investment Management.

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Investment Managers are appointed by BNY Mellon Investment Management EMEA Limited (BNYMIM EMEA), BNY Mellon Fund Management (Luxembourg) S.A. (BNY MFML) or affiliated fund operating companies to undertake portfolio management activities in relation to contracts for products and services entered into by clients with BNYMIM EMEA, BNY MFML or the BNY Mellon funds.

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