How are any dividends from ETFs calculated/returned?

Hi All!

I’m Will, new to the community! Before I ask my question - please forgive my ignorance - although I am spending loads of time learning the ropes, I still have quite limited knowledge! :sweat_smile:

So I know that some ETFs can include or even focus on stocks that give dividends. What I am struggling to wrap my head around is the following:

Because there is this range of companies within an ETF, I assume there can be many varying payout ratios, payout time frames (i.e. quarterly/yearly) etc…
So in what form do dividends arrive from an ETF that includes such companies?
Is it an average of all companies’ payout per share that’s calculated?
Or are individual dividends paid per company within the stock?
Or maybe I’m just barking up the wrong tree completely and ETF investments are not meant to yield dividends!

I ask this because I know the diversification of stocks available from ETFs allows for a good starting point for investing, and they can be safe for long term, defensive investing, right? But I also want to get on the compounding game of reinvesting dividends as early as possible.

Thanks for reading, I’d appreciate any advice.
Will :yum:

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To work out dividend payments, i checked each one with https://www.justetf.com

It shows historical dividend prices and dates so you can work out how much and when.

They come as cash into your FT account.

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Some will be cash paying (‘distributing’ or ‘inc’) and some will take the cash you would have got and re-invest it into the fund (often referred to as ‘acc’ or ‘accumulating’ or ‘reivesting’). These are usually referenced with the long name of the security. So if you see (Acc) in a fund it won’t pay a ‘cash’ div - instead the value of your holding will rise by (approximately) the amount of cash you would have got. Confused? Yeah, understandable.

ETFs do pay dividends. But take into account the above.

ETF dividend data is notoriously a pain and you often won’t find it included in many data feeds (or at least to the level of detail you require). Therefore I’ve tried to fill this gap by making the finki API. Take a look here finki.io/finkiAPI.html and see how you get on. It’s designed to be dumped into Excel of Googlesheets easily for Freetraders who want to track their Freetrade portfolio.

Regarding your ‘safe’ reference - just consider the herding that goes on in ETFs. ETF trading underlying stocks (Indexation) is these days influencing daily price movements quite a lot. Personally, I’m positive on ETFs as -as you say - they provide instant diversification and de-risk you from the ‘eggs in one basket’ danger. That said, ETFs and ETCs have had some issues if your were to look back over the last decade or more of their existence.

As always opinion is divided.

DYOR - as we like to say so we can add even more acronyms in to the mix to confuse the new comers.

Enjoy

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Thank you both!
Really helpful - definitely answered my question. I’ll be using those resources, I appreciate the fast replies!
Finki, your API system sounds really useful, what a great thing to offer - I will be sure to use it when I first invest later this month.
Will

If you’re a Googlesheets user then you can do something as easy as…

=importdata(“https://finki.io/callAPI.php?isin=IE00B0M63060&function=ukDividendYield”)

to check the dividend yield for any ETF … (in this case the iShares Dividend ETF (IUKD) IE00B0M63060)

or…

=importdata(“https://finki.io/callAPI.php?isin=IE00B0M63060&function=ukDividendExDate”)

to check the dividend ex-date for IUKD

You get the point…

Enjoy

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To directly answer your question:

The ETFs holds all incoming dividends received from the underlying companies, and then pays them out to share holders on some periodic basis.

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Thanks for that link sendu! That was exactly what I was after :blush:
Will