Where are my dividends??

FDa65rdk

[Deleted User] wrote:

Hi,


he's got another thread about that here, then there's this one.

Yes, that's true. I was initially asking about the Jupiter India fund in the other thread then remembered as I was typing the message that I had a query about dividends. After posting the message I thought it would be better in a separate thread and that it might also get more responses as on it's own

:beer:

AnotherJoe

FDa65rdk wrote: »

OR.... (I think I've got it!!). No, you haven't. Read on.

Is it that because it's an accumulation fund, that 5% dividend would apply to EVERYONE who has invested in that fund.

"of course" it applies to "everyone" (actually each unit) did you think you were the only person getting a dividend????

FDa65rdk wrote: »

So on the day a dividend is paid on an accuulation fund you should see whatever the change in price is on that day plus the effect of the dividend.

A dividend isn't paid on an accumulation fund !!!
The "dividend" is accumulated gradually as it goes along throughout the year. There is no specific day it's applied, in theory 1/365th is added each day.

FDa65rdk wrote: »

OIn other words, if a fund is offering a 5% dividend and it goes up independently on the dividend payment date by 1% then it should go up by roughly 6% when you include the dividend?

No because as said there is no dividend payment day on an Acc fund BECAUSE THERES NO DIVIDEND. After one year it should have gone up by the same amount as the dividends paid out by the INC fund, however given the ups and downs throughout the year you will never be able to disentangle the contributions made by general stock market changes and you'll never see any specific time when there's a step change due to dividend being added.

Got it ?

Wassa123

FDa65rdk wrote: »

This is the bit I still don't understand. Let's say the cost of a unit is £1, I have 1000 units and receive a 5% dividend.

If that dividend was used to purchase more units, the dividend would be £50 and another 50 units would be purchased, increasing my holding by 5%.

However if the dividend is used to increase the value of each unit then the £50 would be a drop in the ocean (conceivably much less than one millionth) compared to the fund as a whole. This would not be the same as a 5% increase.

OR.... (I think I've got it!!)

Is it that because it's an accumulation fund, that 5% dividend would apply to EVERYONE who has invested in that fund and there would be a massive collective investment on dividend payment day thereby raising the cost of a unit by 5%?

So on the day a dividend is paid on an accuulation fund you should see whatever the change in price is on that day plus the effect of the dividend.

In other words, if a fund is offering a 5% dividend and it goes up independently on the dividend payment date by 1% then it should go up by roughly 6% when you include the dividend?

To confuse things a bit more...

If a fund pays 5% dividends, that 5% doesn't just appear out of nowhere.
The fund is a collection of companies. To make things simple, we'll assume each company pays 5% dividend to the fund, which pays it to you.

However, in order to afford this 5% dividend, the company value should drop by 5%. So you may not actually be seeing a change at all.

Now we're all hoping economic growth would mean that the company value rises by more than this 5% to cover this and keep the company growing, otherwise we're just receiving our investment back over time.

ColdIron

FDa65rdk wrote: »

OR.... (I think I've got it!!)

Sort of

The dividend does indeed apply to everyone, they haven't singled you out for special treatment

For simplicity if we start on the day after the last ex-date. If the fund invests in 100 underlying companies then these companies will pay their dividends into your fund (e.g.Jupiter India) in dribs and drabs as their ex and payment dates will all be at different times. Each time an underlying company pays into your fund it becomes more valuable as it has more money in it so the unit price increases

On the next ex date what happens depends upon whether you have the Inc or the Acc class

• Inc - The dividend accrued since the last ex date is effectively removed from the fund waiting to be paid out on the Payment Date a bit later. Since all that cash has been removed from the fund its unit price drops, let's say for the sake of argument by 5%

• Acc - Nothing happens. The dividends paid into the fund by the underlying companies are simply retained and the unit price is unchanged. The ex div date for an Acc fund is largely meaningless excepting for tax purposes. Just because it's not paid out as cash doesn't mean you didn't benefit from it

As you say it can be difficult to see the drop in the Inc fund because of other market movements, the unit price could even increase if the value of the underlying funds were increasing

There is a way that you can see it though, by comparing the price of the Acc and Inc classes. You can't do this with your Jupiter India fund as there is no Inc class so let's play with Vanguard Lifestrategy 100 which has an ex div date of early April

Go here to see the Acc fund

https://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/v/vanguard-lifestrategy-100-equity-accumulation

You're with HL right? So this should make sense to you. Go to the Charts and Performance tab

Add the VLS100 Inc fund so you can see them overlaid
Choose a time span of 1 year
Choose a chart type of price (not total return, this is important)

You will see the unit price of both funds is exactly the same before April. After April the price will diverge reflecting the payment of the dividend for the Inc fund. The Acc fund just carries on as literally nothing has happened to it

FDa65rdk

AnotherJoe wrote: »

"of course" it applies to "everyone" (actually each unit) did you think you were the only person getting a dividend????

I didn't ask if the dividends applied to everyone... (Sigh)

FDa65rdk

Dear God, this is complicated!

It's states on the fund info when the dividend payment date is but there's no specific payment date...

It says what the yield is but there is no dividend...

Thanks for taking the time to respond but I'm still in a state of confusion.

Should I just take it that what I've mentioned as a query in my OP is nothing to worry about and that whatever benefit there may be to the dividends is something that I'm automatically getting?

eskbanker

FDa65rdk wrote: »

Dear God, this is complicated!

It's states on the fund info when the dividend payment date is but there's no specific payment date...

It says what the yield is but there is no dividend...

Thanks for taking the time to respond but I'm still in a state of confusion.

Should I just take it that what I've mentioned as a query in my OP is nothing to worry about and that whatever benefit there may be to the dividends is something that I'm automatically getting?

There's nothing to worry about, but if you want to satisfy yourself about that then follow ColdIron's instructions from post #25 to validate that the price of the Acc version of the fund diverges from the Inc one, thereby demonstrating that the dividends are indeed being reinvested automatically as intended....

londoninvestor

FDa65rdk wrote: »

Should I just take it that what I've mentioned as a query in my OP is nothing to worry about and that whatever benefit there may be to the dividends is something that I'm automatically getting?

Economically speaking yes.

If you're holding this fund outside an ISA or SIPP, you do need to know the nominal dividend amount and the date it was deemed as being paid, for your tax return - but your end-of-tax-year statement from HL will present it neatly for you. (As mentioned on your other thread about equalisation, you get a handy table showing you all the dividends and equalisation amounts you got during the tax year.)

FDa65rdk

Thanks. It's within a stocks and shares ISA.

londoninvestor

FDa65rdk wrote: »

Thanks. It's within a stocks and shares ISA.

Great, so essentially you can ignore it and just rely on the dividends rolling up within your fund - which is what accumulation units are for

It does come in useful to learn the ropes now, as you have, because you need a bit of understanding of it if your portfolio outgrows what you can fit in ISAs and SIPPs.