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How Do ETF Distributions Work? Top 12 Questions Answered

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ETF distributions can often be a source of confusion. At the end of every financial year, when ETF distributions are paid, we receive many questions about how they work. In this article, we answer some of the most common questions. Those wanting to speak with us can always call us on (02) 8311 3488.

Top 12 Questions

  1. What is the cut-off date to receive an ETF distribution?

  2. When do I get my ETF distributions?

  3. How do I choose to participate in a distribution reinvestment plan?

  4. What price do you get when you participate in a distribution reinvestment plan?

  5. Why does the ETF price drop on the ex-distribution date?

  6. How are distribution reinvestment plans implemented?

  7. What happens to leftover cash from dividend reinvestment plans?

  8. How can I know how the size of a distribution?

  9. Where do I find my ETF tax information?

  10. Why doesn’t my broker allow me to reinvest my ETF distributions?

  11. Why do some ETFs not pay distributions?

  12. What process does ETF Securities have to manage distributions?

1. What is the cut-off date to receive an ETF distribution?

To receive a distribution, you must own the ETF – the trade must have fully settled – before the record date. This means that you should aim to buy an ETF at least two business days before the record date (as ETF trades take two business days to settle) should you wish to receive a distribution.

The record date is the date on which Computershare, the share registry, records who owns which ETFs and therefore who is entitled to distributions. ETFs with multiple distributions will have multiple record dates throughout the year. They usually occur just before the end of the quarter. (We discuss the example of ZYAU below).

2. When do I get my ETF distributions?

Distributions are paid on the payment date, which is announced ahead of time on the ASX’s website. On the payment date, investors will receive the cash – or new ETFs, if they chose to reinvest their distributions. They will also receive franking credits. Different ETFs will have different payment dates and frequencies. Details are available on the websites for each fund.

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To give an example (screenshot above), the ETFS S&P/ASX 300 High Yield Plus ETF (ASX Code: ZYAU) pays a distribution every quarter, which varies in size. On 18 January 2022, it paid a 3.56306 cent distribution on every unit. And provided a franking level of 33.0535%. To receive this dividend, investors had to own their units in ZYAU on 4 January 2022, the record date.

3. How do I choose to participate in a distribution reinvestment plan?

Computershare is the share registry used by ETF Securities and manages the communication between ETF Securities and our investors. Investors can log into Computershare’s website and elect to reinvest their distributions. This is available on https://www-au.computershare.com/investor/

We have a step-by-step guide how to use Computershare available here.

4. What price do you get when you participate in a distribution reinvestment plan?

Distributions reinvest at the closing NAV price on the ex-distribution date, sometimes called the “ex-date”. Distribution reinvestment plans incur no brokerage fees or trading slippage, meaning the full distribution is reinvested.

5. Why does the ETF price drop on the ex-distribution date?

On the ex-date, ETF prices will fall by an amount approximately equal to their distribution. This happens because on the ex-date, the distribution money owed to investors is removed from the fund. This causes the net asset value (NAV) of the fund to fall, and by extension the price.