Fund dividends

Drambuie

Hi all,

Have started a s+s ISA with H+L and have a query about funds - specifically dividends.

Why would I not choose a fund that pays dividends more frequently than others? Eg. some pay monthly, some quarterly while others only pay yearly.

Do the ones that pay monthly pay their dividend % every month? This seems a lot of income added to the value. It can't be that simple can it??

Thanks

Lokolo

I believe the % is annual equivalent, but could be wrong.

edit

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http://online.h-l.co.uk/website_help/help_fund_factsheet_glance
Seems I am correct Scroll down to the dividend section

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There's no real difference but it depends when you need the income, for some people the income is needed every month, some people like to have it bi-annually etc. it's all down to personal circumstance.

Drambuie

Ahh excellent, thanks for the speedy reply.

Jake'sGran

I remember reading that people often buy shares depending on the dividend payout dates so that they get a steady stream of income throughout the year. You would need to do your homework for this though so as to find the solid companies that have paid steady dividends for a number of years - mostly blue chips I imagine.

It would work with funds too but would probably require even more research.

I did notice that on the Share Centre website you can see a section showing shares for dividends for income seekers.

jimjames

I guess it depends why you are getting the dividends - is it for the income or to reinvest? If reinvesting then some platforms have a minimum reinvest amount so paying more frequently may not actually get invested for some time until the amount had built up.

Whether paid monthly or yearly it is still going to be the same amount - you won't get a years worth of dividends paid each month.

CLAPTON

do remember that some of the big dividend payers of a few years ago were rock solid compaies like Lloyds TSB, RBS, HBOS and BP

cashbackproblems

My dividend paying stocks are Vodaphone, Aviva and RSA insurance. But i dont need the cash so reinvest auto, iii charge 1% or so for this

Loughton_Monkey

For the vast majority of funds, there are 'Income' and 'Accumulation' varieties. Since I don't want the income - which is in effect taking money out of my tax free ISA - I always pick the 'Acc' variety.

If I were looking to take an income, then I would be looking for those I thought gave the highest yield. I wouldn't bother too much whether it was paid monthly or quarterly or 6 monthly.

With HL, there is no fee for re-investment. However, rightly or wrongly, I perceive that accumulating dividends in the fund itself would be quicker (and hence more beneficial) than having them paid to my HL account, and then waiting for them to be 'dealt' to buy new units. It also plays havoc with accurate valuations. Not only that, there is usually a very long delay between XD date, and the date actually paid. There is a good chance that I might want to sell and re-invest that fund in the interim period - in effect leaving me with 'spare cash' in the ISA. This is typically lower than £1000 minimum deal and so it has to wait until I do another 'switch'.

Hence, I cannot see the logic of buying 'Inc' units and re-investing the dividend [unless, of course, there is no 'Acc' flavour].