posted: May. 11, 2008 @ 7:41p
SaulHudson said:My S&P 500 index fund has not paid any dividends yet this year. They've been paid quarterly the past 2 years. What am I missing that I haven't gotten any yet this year? I feel like I'm missing something obvious but can't figure out what it is. I mean even if the market is tanking, I should still get dividends, right? I can name the fund if that helps, but I don't want to get in trouble for plugging it.
Also, in general, is there a way to figure out when funds pay dividends? Should I be able to look this up in the prospectus? I've looked in the prospectus for this fund and a couple others but didn't really see anything. I have been able to look up the past history of dividends per year. But, that doesn't tell me if they're paid monthly, quarterly, yearly, or whatever.
Any help is appreciated. Thanks.
First, mutual funds don't pay dividends. Stocks do. What mutual funds pay out are called "distributions". This is similar to dividends but not the same. Tax wise, dividends are treated more favorably than other capital gains. But mutual fund distributions are treated as ordinary-type gains, whether they be long-term or short-term.
Though it may be true that dividend-yielding stocks may generally payout even when the market is tanking, this is not always the case with mutual funds and their distributions. Distributions are declared whenever the fund thinks that declaring gains (or losses) are most favorable to the majority of fund shareholders. This can be either due to tax reasons or to encourage further investment or any number of reasons. But, they don't always have to be declared. Sometimes a distribution can do more harm than good, especially when the tax consequence will generate a short-term gain instead of a long-term gain for the majority of fund shareholders. It may also depend on whether you are invested in a tax-efficient growth fund or an income fund. One value fund I held only declared distributions once a year and sometimes not at all, while an income fund that I have declares them every three months. Some funds even go so far as to declare them every week. It all depends on the nature of the investment. Your best bet is to look at your prospectus at the history of distribution declarations to get a general idea of how often these are declared for your particular fund. You probably didn't see the distribution chart because you were looking for "dividends" instead, which clearly would not be there.
kaneohe said:BrlDsguise said:Why don't you call them and ask? I will note that you don't "get" anything when your mutual fund pays a dividend since the fund price drops by the amount of the distribution (in addition to any gain or loss it had that day).
What you "get" is a tax liability.
Not necessarily. What if the fund is held in an IRA? I do this with all of my income funds that have regular distributions. I also do this with stocks that have regular dividends. The only stocks and funds that I keep in my regular brokerage account are the ones that don't have dividends and distributions that I plan to hold on to for a long time.
