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Vanguard ETF dividends

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It has been mentioned when an ETF goes ex-distribution the price drops. I was curious to see what the situation was with both VAS & VGS which I hold and have gone ex-distribution today. For both the price has increased. Could end lower at close of trade today though.

Maybe it isn't a hard and fast rule and it actually relies on market sentiment. Not an issue for me however.
 
since ETFs trade close to NTA ( by design ) they do not normally suffer the same automatic drop as a normal share ( or LIC ) because the market makers are guaranteed buyers ( to a point ) ( as well as guaranteed sellers )

now of course liquidity has a say if this a lightly traded ETF is more likely to trade at the lower edge of the market makers spread than a popular ETF where investors compete for units

currently the XJO is up nearly 1.5% and VAS is up nearly 1% which would suggest retail buyers are not so eager to buy today and that buying appetite is more influential than the div. entitlement

unlike a normal div. paying share , which would drop by roughly the div. payout , BUT was also more likely to have risen cum dividend , as investors bought up to harvest the dividend .

now those mathematically inclined traders MIGHT see an angle here for div. harvesting ( especially if franking credits are unimportant to you )
 
Belli said:
It has been mentioned when an ETF goes ex-distribution the price drops. I was curious to see what the situation was with both VAS & VGS which I hold and have gone ex-distribution today. For both the price has increased. Could end lower at close of trade today though.

Maybe it isn't a hard and fast rule and it actually relies on market sentiment. Not an issue for me however.
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they do. just so happens that the market movement has drowned out the distro - XJO is up 1.6% today vs VAS up 1%, with the distro making up the difference, give or take.

same with VGS which only went up 0.8% vs IVV/VEU (a rough proxy - not sure what the code is for the index that VGS tracks) which have gone up 1.1%/1.5% today, none of these are currency hedged so they would all have been helped by the AUD/USD dropping about 60 pips since they last traded on dec 31.

VEU went ex on 21 dec and dropped by quite a bit then. whilst IVV yield is so small these days it just gets drowned out by market movement most of the time.
 
With regard dividend/price performance, which ETF's have you guys felt personally comfortable with, I find some companies give a better 'vibe' than others and thus tend to be less volatile.
I personally felt happier with AFI than MLT as a LIC, MLT ended up being swallowed by SOL, but I always felt more comfortable with AFI anyway.
I think it is o.k to discuss it in a general manner like this, otherwise @Joe Blow can delete the post.
 
Belli said:
It has been mentioned when an ETF goes ex-distribution the price drops. I was curious to see what the situation was with both VAS & VGS which I hold and have gone ex-distribution today. For both the price has increased. Could end lower at close of trade today though.

Maybe it isn't a hard and fast rule and it actually relies on market sentiment. Not an issue for me however.
Click to expand...
Share prices can rise on Ex date, all it means is that they would have risen further if it hadn’t been ex Div.

for example- if a share is $10 and it goes Ex dividend on a 25cent dividend, then all else being equal the share should drop to $9.75.

However if the market was rising that day, and the share price ends up rising by 10 cents to $10.10 instead of dropping to $9.75 then it’s actually equal to the stock rising by 35cents, and had the ex dividend not happened that day the share price would have been $10.35 instead of $10.10

so basically what I mean is the daily ups and downs will still exist, it’s just the down days will be exaggerated by ex Div, and the up days will be suppressed.

Also if a company produces strong daily cash flows, the amount paid out as a dividend should be recouped by fresh profits flowing into the company’s account, so over the following months the ex Div effect will fade away as the company bank accounts refill.
 
well i tend to treat ETFs as insurance ( blanket sector/index coverage if you like )

personally i have a bias towards LICs and REITs ( compared to ETFs ) because your fund manager ( normally ) has a mandate and a strategy

now sure your manager will make poor choices from time to time ( just like when i stock-pick ) but the better ones have a strategy , and explain the portfolio moves and their perception of the market

whereas most ETFs ( that aren't actively managed ) use a reference index , an algorithm , and the computer does the rest with minimal errors , and as long as the market goes up everything is rosy ( and DRP participation helps as well )

now my best capital gain in an ETF has been ASIA ( so i took out the investment cash during a peak ) , my best performer ( for me , because i have sold down and bought extras later ) has been SYI

but interesting times are coming , i guess we will see what happens when the tide goes out ( investors can be very fickle )
 
Value Collector said:
However if the market was rising that day, and the share price ends up rising by 10 cents to $10.10 instead of dropping to $9.75 then it’s actually equal to the stock rising by 35cents, and had the ex dividend not happened that day the share price would have been $10.35 instead of $10.10
Click to expand...

interestingly the CHESS brokers don't recognise this but the US brokers (or at least IB) do - in this situation the CHESS brokers will show 10.10 (+0.10) but IB will show 10.10 (+0.35). maybe it's just a difference between Aust and US market convention, or it could be each broker does their own thing, but personally i prefer the IB approach as it's a more accurate reflection of your daily PNL.
 
While not know the exact methodology I'll have some idea in the next couple of weeks how VAS and other equivalent ETFs will deal with this following the BHP/Woodside merger. I was asked about it by one of my kids and I told them "No idea". Only after they asked was I aware of the share issue as an in specie dividend.

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