What (if one exists) is the standard way for estimating future dividends on bond etfs?

The major challenge in my mind is that the monthly dividend distributions of a bond etf (like HYG) don't necessarily correspond to the interest income received that month from the underlying bonds of the etf. This is because the ETF manager doesn't immediately turn around and pay out all of the interest income immediately.

For the past few months HYG dividends have hovered around the $0.37 mark for every month. In the near-term, you would expect the dividends to continue around there. But what happens 6 months down the line? There's a lot of variation in dividends when you look at historical periods of that length.

Now, somehow the market comes up with estimates for dividends and you can find them in the implied forwards of options on HYG. What's the standard way to do this?


1 Answer 1


You just look at the holdings

This ETF even publishes its list of future expected cash flows...

https://www.ishares.com/us/products/239565/ishares-iboxx-high-yield-corporate-bond-etf https://www.ishares.com/us/literature/cashflows/ishhyld-etf-cash-flows.csv

  • $\begingroup$ Thanks for this informative answer. The cash flows of the bonds are not the dividends of the ETF. So, do people just usually assume a certain delay between the interest income and dividends (e.g. 3 months or something like that?) to come up with the dividend estimates I can see. $\endgroup$ Sep 18, 2017 at 14:50
  • $\begingroup$ The fund manager has discretion over the amount paid, he will usually smooth it to avoid jumps because some investors have certain distribution expectations for tax purposes. You can only predict the amount, just like you would for any listed stock. There can be changes in the index composition or events (calls/defaults) that will affect the accuracy of your prediction. There are other funds which are purely pass through, in 2008 this fund declared all the future monthly dividends for the year in January, so no general rule. $\endgroup$
    – Lliane
    Sep 19, 2017 at 2:54

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.