Investors need to realize that companies do not pay dividends daily and the time between the company paying the dividend and when the ETF manager distributes the dividend varies. During this time, the assets under management usually grow and so does the investor base. The yield realized gets spread out, and is usually less than expected from the underlying portfolio. [An ETF That Tracks Constant Dividend Payers]
The opposite of this is also true, where an ETF may show large outflows, causing the dividend yield to rise higher than the stated yield in the prospectus.
Tisha Guerrero contributed to this article.
Full disclosure: Tom Lydon’s clients own DVY.