The Complete Guide to ETF Portfolio Management by Scott M. Weiner

Author:Scott M. Weiner
Language: eng
Format: epub
Publisher: McGraw-Hill Education
Published: 2021-06-15T00:00:00+00:00

CASH DIVIDENDS

A dividend payment from a stock is usually a cash payment to shareholders, but dividends can come in a variety of forms. For example, besides cash, dividends can be paid in stock; and while the schedule of dividend declarations, ex-dates, and payment dates is typically announced well ahead of time, “special” dividends can be paid off-cycle.

We’ve covered dividends in a number of chapters already, with the key points being how the dividends are handled in the index files and PCF files and how PMs ought to think about the timing of cash flows as they relate to dividends.

In the case where dividends are received in stock instead of cash, the impact on the index is generally different (unless otherwise stated in an index methodology): instead of a declining weight in the dividend-paying stock, the weight remains constant. This generally means that there is no pro rata investment across the remaining names in the index. For the ETF PM, this is a nonevent: the weight remains unchanged in the portfolio as well, and therefore no action is required.

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