What are the best dividend earning ETFs that will be available on Freetrade? Iām new to ātradingā, Iāve relied on managed S&S ISAs in the past and looking to learn some basics and manage my own finances more on a small scale.
Andy, welcome to the forum!
There are will be several income focused ETFs at launch that though the two highlighted below have a specific focus on high yielding dividend yielding UK companies.
IUKD āTracks the performance of an index composed of UK companies to the higher yielding sub-set of the FTSE 350 Index. Income will be distributed as cash.ā
UKDV āTracks the performance of 30 highest yielding dividend companies in the UK. Income will be distributed as cash.ā
Link to google docs below is the list of securities available at launch. If you search āincomeā, it will highlight all the ETFs that provide income, with a note to say whether income is distributed as cash or reinvested into the fund. Searching āincomeā will also yield results that include ETFs comprised of corporate and government bonds and property companies that deliver cash income as well as shares that pay dividends - have fun!
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Thanks for that, will have a good read of this. Excited to learn about this stuff.
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What does āincome will be distributed as cashā mean? Is it a dividend or a dodgy man with used notes in brown envelopes?
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If youāre big enough in the game @Rat_au_van, Iāve heard it comes in suitcases rather than envelopes.
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Itās not quite that exciting Iām afraidā¦ā¦The companyās registrars will pay any income due into Freetradeās client money account. Upon receipt, weāll allocate the income to eligible beneficial holderās Freetrade account where it will remain pending reinvestment or withdrawal, that bit is up to you!
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Hi Andy,
Welcome to the community! Itās great that you are looking to take more control of your investments. If youāre interested in comparing the past performance of some of the ETFās available, then the Ishares website is pretty comprehensive:
You can sort by dividend yield, performance, etc. It helps to give you an idea of the fundās objectives and depending on how much detail you want, the Factsheets should also be available. Personally I would always take a look at the Factsheets before parting with my money.
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Iām struggling to interpret the terms in those tables..am I right in thinking that the āFlat Yieldā, which is:
the annual coupon payment [aka the payment that the investor receives] divided by the current price. For iShares ETFs, the Flat Yield is calculated as the average of the underlying bondsā flat yields weighted by the bondās weight in the fund. Flat Yield can be referred [to] as income yield, running yield or current yield
is the best piece of info to use to see the highest paying ETFs, relative to the ETFās price?
And the Weighted Average Coupon:
The mean of the coupon rate of the underlying bonds in the portfolio
is the best piece of info to use to simply see the highest paying ETFs?
Also, hereās the same information for the other ETFs in the Stock Universeās Day 1 tab, in the order that theyāre listed in on the spreadsheet:
- SPDR FTSE UK ALL-SHARE UCITS ETF (income reinvested, not paid out)
- PIMCO Ā£ Short-Maturity ETF
- SPDR S&P UK Dividend Aristocrats UCITS ETF (income reinvested)
- Vanguard UK GILT UCITS ETF
- Vanguard FTSE 250 UCITS ETF
- Vanguard FTSE 100 UCITS ETF
- Vanguard S&P 500 UCITS ETF
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@anon2636484 There is certainly a lot of information to digest but I would say that is a very good interpretation.
The flat yield would probably be the cleanest indicator for someone looking for the best income earning fund as it is simply, the annual distribution / current price.
The highest āaverage weighted couponā may not necessarily result in the highest returning fund relative to cost as there may be other factors to consider, for example risk of default or general market conditions.
When looking at these things, itās always worth remembering that past performance is not necessarily a guide to future performance.
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Are you going to add more ETFs to the universe ahead of launch? The ETF options are limited. UK stocks are pretty dull so I reckon most early Freetrade users will just buy ETFs, yeah? With issues around US ETFs you may as well just whack a load of UK ETFs into version 1.0 to satisfy demand.
When are dividends usually paid and how often? Or is it completely varied?
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Depends on the individual company, and etf. Some do annual only, some do semi-annual, some do quaterly. You can check āinvestorsā relations websites of the relevant companies for details - e.g. checkout investors details website of HSBC, Vodaphone, Aviva.
Similarly for ETFs. E.g. IUKD is quarterly, as can be seen on the ishares website. They basically pay-out whatever they received from the companies.
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