Vanguard Life Strategy Accumulation Shares

rangers_fc

Can someone please explain the dividend with Vanguard Life Strategy accumulation shares. Are we paid a dividend that increases the fund holders numerical holdings if re-invested, or are dividend re-invested in the shares that are currently issued, increasing there value, with no numerical gain to the share holder s holdings other than share price. When is the divedend paid if its actually paid out or re-invested?
I see there was a divedend of 2.0% in April 2016 its just how this is distributed im confused about
Thankyou

lpgm

They don't issue you new shares - your holding stays the same. But the price goes up. ACC shares are higher than INC shares.

rangers_fc

So If that is the case, no new issue of shares, is the share price likely to rise on the divedend date, by the divedend increase, 2% for example April 2016, subject to market conditions on the given day

System

No, otherwise everybody would buy the day before and sell the day after for a quick profit! I think this is a simple example of the no-arbitrage condition!

Tom99

[FONT=Verdana, sans-serif]Just like an Income Fund, a Acc fund value increases in value each day as company dividends are paid to the fund and add to its assets.

[/FONT] [FONT=Verdana, sans-serif]However on the day an income fund goes ex-div the price will drop by the value of the dividend. The price of the Acc fund remains the same and does not fall or rise on the ex-div date.[/FONT]

lindabea

Tom99 wrote: »

[FONT=Verdana, sans-serif]Just like an Income Fund, a Acc fund value increases in value each day as company dividends are paid to the fund and add to its assets.

[/FONT] [FONT=Verdana, sans-serif]However on the day an income fund goes ex-div the price will drop by the value of the dividend. The price of the Acc fund remains the same and does not fall or rise on the ex-div date.[/FONT]

This is a question that has been bugging me as well. And reading through these replies, I'm more confused. So if the number of units does not increase and the value of the fund does not increase, what effect do the dividends have to an acc fund? How are dividends reflected in the fund value?

Linton

lindabea wrote: »

This is a question that has been bugging me as well. And reading through these replies, I'm more confused. So if the number of units does not increase and the value of the fund does not increase, what effect do the dividends have to an acc fund? How are dividends reflected in the fund value?

In the both funds the shares in which the fund invests steadily pay their dividends into the fund continually increasing the price. In the Inc fund they are paid out again when the fund pays its dividend and so the Inc fund price falls. Nothing happens to the Acc fund so its price doesnt fall.

Audaxer

lindabea wrote: »

This is a question that has been bugging me as well. And reading through these replies, I'm more confused. So if the number of units does not increase and the value of the fund does not increase, what effect do the dividends have to an acc fund? How are dividends reflected in the fund value?

If one person has the Acc fund and another person has the Inc fund and both are currently valued at £5,000, the amount of the dividend due to be paid, say £200, will be deducted from the Inc fund on ex-div date, so the Inc fund on that date will be worth £4,800 with the £200 dividend to be paid on the dividend date. Meanwhile the Acc fund will still be worth £5,000 (both funds subject to normal market fluctuations).

Tom99

lindabea wrote: »

This is a question that has been bugging me as well. And reading through these replies, I'm more confused. So if the number of units does not increase and the value of the fund does not increase, what effect do the dividends have to an acc fund? How are dividends reflected in the fund value?

And the divs which have accululated in the Acc Fund will eventually be reinvested in more individual co shares.

lindabea

Audaxer wrote: »

If one person has the Acc fund and another person has the Inc fund and both are currently valued at £5,000, the amount of the dividend due to be paid, say £200, will be deducted from the Inc fund on ex-div date, so the Inc fund on that date will be worth £4,800 with the £200 dividend to be paid on the dividend date. Meanwhile the Acc fund will still be worth £5,000 (both funds subject to normal market fluctuations).

Thank you all for your replies. Sorry for appearing dense, but I can't get my head round this!! In the above example, someone with an inc fund would see no benefit from the dividend because the £200 paid out as a div would reduce the fund value by the same amount. ie net gain = 0. Similarly, someone with an acc fund would also see no benefit from the dividend if the fund value remains the same. So how does an investor benefits from dividends?

Tom99

lindabea wrote: »

Thank you all for your replies. Sorry for appearing dense, but I can't get my head round this!! In the above example, someone with an inc fund would see no benefit from the dividend because the £200 paid out as a div would reduce the fund value by the same amount. ie net gain = 0. Similarly, someone with an acc fund would also see no benefit from the dividend if the fund value remains the same. So how does an investor benefits from dividends?

[FONT=Verdana, sans-serif]Because both Inc and Acc Fund values will increase as they receive the dividends from the companies they are invested in.

[/FONT] [FONT=Verdana, sans-serif]For example a FTSE100 Tracker will probably receive about 20 individual company dividends a month. These will all add to the Funds assets and the Fund value will go up in price.

[/FONT] [FONT=Verdana, sans-serif]Every 6 mths or however frequently the Fund pays dividend the Inc unit holders receive a dividend in cash and the value of the unit they own goes down in value by the same amount. The div the Acc holder receives gets plough back into more FTSE100 shares.

[/FONT] [FONT=Verdana, sans-serif]As an example if both Inc and Acc started at a value of 100 and you ignore market movement and 2 was received as div in the 1st 6 mths then the value of both Inc and Acc would be 102 the day before they went ex-div. The day they go ex-div the Inc holder has 2 in cash and a unit now worth 100 but the Acc holder still has a unit worth 102.[/FONT]