Do index linked ETF's give dividends?

aparoid89

Active member
146 1
I have an ISA with Hargreaves and Lansdown and for the dividend yield it says N/A. Surely an ETF that tracks the FTSE 100 should pay a dividend. Does it pay the same way as a normal company where you can reinvest for a smaller commission?
 

new_trader

Legendary member
6,568 1,428
I have an ISA with Hargreaves and Lansdown and for the dividend yield it says N/A. Surely an ETF that tracks the FTSE 100 should pay a dividend. Does it pay the same way as a normal company where you can reinvest for a smaller commission?

Not all ETF's pay a dividend. Some are income ETF's (pay dividend) and some are accumulating ETF's (reinvest).

iShares FTSE 100 UCITS ETF (Inc) (ISF) | Key Fact | iShares United Kingdom ETFs | Individual Investors

iShares FTSE 100 UCITS ETF (Acc) (CUKX) | Key Fact | iShares United Kingdom ETFs | Individual Investors

Which ETF do you have?
 

aparoid89

Active member
146 1

I don't have one right now but I was planning on getting one and then reinvesting the dividends. I guess the accumulation one would be better to avoid excess commissions. Wouldn't it be harder to know whether an index fund is over or under valued if the price was not equal to the underlying index but has to take into account the extra reinvested dividend?
 

new_trader

Legendary member
6,568 1,428
I don't have one right now but I was planning on getting one and then reinvesting the dividends. I guess the accumulation one would be better to avoid excess commissions. Wouldn't it be harder to know whether an index fund is over or under valued if the price was not equal to the underlying index but has to take into account the extra reinvested dividend?

Every index fund is going to have a tracking error of +/- a few % because of things like management fees. You are unlikely to find any passively managed index ETF that tracks the index with 100% accuracy, 100% of the time, but they get close to that. Most of the funds publish performance figures and charts so you can see whether the fund is trading at a premium or a discount.
IMO: Market timing is much more important than worrying about whether the fund is trading at a premium or discount today or tomorrow or the day after...
The important things to look for are:

1) Expense Ratio (TER) %.
2) Whether the fund is fully replicating or optimised.
3) Whether the fund is physical or synthetic.

Don’t ask what they all mean...do your own research.
 
 
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