A market for dividends paid on major equity indices and paid by large companies
has developed around the world. This market, in a manner similar to that of the
U.S. Treasury strip market, allows investors to invest in future dividend cash
flows independent of investing in the equities. Since 2004, dividend swaps have
been a major profit contributor for multistrategy and macro hedge funds because
market-implied dividends have been trading at high discounts and dividend growth
has been strong. This article contains a discussion of current instruments and
market dynamics, investment strategies and methods of forecasting dividends, and
potential benefits and problems in this market.