Funds & Dividend Payments

colinjd

Afternoon,

My ever-so simple brain is struggling to get itself around accumulation units...

Exactly how do dividends get paid into funds that are accumulation units? I hold some of the Woodford Equity Income fund and ex-div date was 31/12/14 with a payment date of 28/02/15

The number of units I hold hasn't changed, the unit price has moved according to the daily pricing and there's been no additions to my income account so how do I know when I've received a dividend? How is anyone that held the fund at ex-div notified of their dividend.

Thanks

bowlhead99

You get a statement from the fund (via your platform) which shows what income has been capitalised (it will be taxed as a dividend and your investment cost, for tax purposes, increased accordingly).

You are right the number of units hasn't changed and the price hasn't really fluctuated. If instead you had the income units, they would have paid money out of the fund's bank account into your hands and so each unit, ex- the dividend rights, would become less valuable.

Some people think of acc units a bit backwards IMHO - effectively they expect the price to rise as their quarterly or annual dividends are 'paid' into the fund (internally) to be reinvested. It is not quite the same as that. Instead, the fund holds a bunch of investments and a pile of cash received from investee companies. It simply doesn't pay that cash out so the price doesn't fall, like the income unit price would fall. That accounts for the ACC units having a higher NAV than the INC units which have been paying out.

In due course, the ACC fund will just spend the cash pile on buying more assets, while the INC fund has to wait for subscribers to put more money in before it can buy more assets.

Lokolo

And if you want to see the effect on a greater scale. Look at a fund which has INC and ACC and longterm history. Compare them and you will see the performance difference of having the dividends kept inside vs. paid out.

colinjd

Lokolo wrote: »

And if you want to see the effect on a greater scale. Look at a fund which has INC and ACC and longterm history. Compare them and you will see the performance difference of having the dividends kept inside vs. paid out.

I took your advice and did just that on another fund I hold - Artemis Global Income. I know 5 years isn't long in investing terms but there is no difference at all in the graphs between ACC or INC, the two lines are indistinguishable from each other.

I'm on HL, by the way, so I don't know if how they present the data is different from any other platform.

Linton

colinjd wrote: »

I took your advice and did just that on another fund I hold - Artemis Global Income. I know 5 years isn't long in investing terms but there is no difference at all in the graphs between ACC or INC, the two lines are indistinguishable from each other.

I'm on HL, by the way, so I don't know if how they present the data is different from any other platform.

No - most performance graphs show the total return assuming dividends are re-invested. So unfortunately Lokolo was wrong. What you can do is to look at Trustnet's portfolio tool. This allows you to graph performances with or without dividends reinvested and would show the effect.

noggin1980

Why do some funds list their yield as zero when they contain shares that are paying dividends and the acc fund is valued higher than the inc fund?

ie VANGUARD EMERGING MARKETS STOCK INDEX FUND

the biggest holding is samsung which pays a dividend yet the fund yield is listed as zero, im confused.

bowlhead99

Probably an error. If you go to the Vanguard website you can get the 'factsheet' for that fund and will see that the yield is about 2%. It will vary slightly between inc and acc due to the timing of the payouts/ non payouts and cash reinvestments.

le_loup

Linton wrote: »

What you can do is to look at Trustnet's portfolio tool. This allows you to graph performances with or without dividends reinvested and would show the effect.

As does H-L's graphing tool.

colinjd

@Linton - You were right, thanks. I can't post images but over the 5 year period there's about a 40% difference in price when dividends are not re-invested.