Accumulation Shares and Ex-Dividend Dates

Linton

BettySpofkins wrote: »

Hi, maybe somebody smarter than me could help explain something, or correct my understanding...

With accumulation units in funds, dividends are not paid out in cash, but are rolled into the share price. Thus on dividend day, a shareholder should see an uplift in the price of their holding over and above market movements.

To benefit from this uplift, one must hold the shares on the ex-dividend date, let's say a couple of months earlier.

So if I hold a share on the ex-dividend date, and you buy a share after that date, my share should increase in value when the dividend is paid, but yours should not.

But here's the rub: shares in funds just have the one price! It's quoted on the fund manager's web page. There's no "me price" and "you price"!

What gives? What's to stop people just buying the day before dividends are paid and selling the day after? What subtlety am I missing here?

I would have thought that both the INC fund and the ACC fund are continuously increasing in value (hopefully) from investment gain and dividends from the shares they invest in. At some points in the year the INC fund cashes in some of its investments to pay them out as a dividend. The ACC fund doesnt. So there isnt any dividend re-investment day for the ACC fund, its an absence of a dividend paying day, and so no step change in ACC fund value.

sabretoothtigger

Some Income funds have a fixed return so they do sell down capital to always pay.

The price basically suffers then.

As standard I think income means they just pay it forward, whatever each company share decides is payable is given to the fund which deducts costs and pays