Do I get notified when a stock/etf I'm holding accumulates its dividend?

I recently bought into my first etf that is accumulating and not distributing. And I was curious about this, Does it give you a notification with details like it does when you are paid dividends on a stock? Thanks

@Raz You do get notified when a stock pays out dividends & you receive them, however, that’s not exactly the case with accumulating ETFs. Since they reinvest the amount, you don’t receive any proceeds, thus you’re not notified when the fund allocates the cash.

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@Raz @David For an accumulating ETF the reinvested dividend amount, which is called “excess of reported income”, can be found in the Literature section of an ETF provider. For example, iShares SWDA has a taxable dividend deemed paid at 31/12 each year. This is roughly the same amount of income that the distributing version of the ETF distributes, if a distributing version exists. See page

https://www.ishares.com/uk/professional/en/products/251882/ishares-msci-world-ucits-etf-acc-fund

and spreadsheet provided there:

https://www.ishares.com/uk/professional/en/literature/tax-information/ishares-iii-participant-report-2019-emea.xls

All providers of accumulatung ETFs are required by law to report this information for both investors and tax authorities to use.

The reason is simple. If there were not this reporting regime then people could use accumulating ETFs to implement tax avoidance schemes.

Thus the takeaway message is that we are not notified, but if we hold an accumulating ETF in a taxable account then we have the responsibility to look this up ourselves. Personally, I find this a nuisance, but there we are. It adds a few minutes each year to my tax return preparation work. Alternatively, I can avoid it by making sure I never own a share of an ETF on the date of its excess income distribution, eg 31/12 in the case of SWDA.

To make things more difficult, even distributing ETFs, like VUSA, have “excess of reported income” in addition to their distributed dividends, meaning that these may have 4 quarterly amounts to report for tax, plus the 1 additional excess amount that was not distributed, so 5 amounts in total to account for on my tax return. So the problem of needing to look up on the iShares website, or other provider, cannot be avoided by owning only distributing ETFs.

No broker I know of helps clients by reporting to them the amount of the undistributed income. We are on our own to find it from the ETF providers’ websites.

All this hassle is avoided of course if you hold the ETF in an ISA. Maybe that is the case for you. I hope my answer at least helps you know how to find the cash value of the dividend reinvested in your accumulating ETF.

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Fortunately I am using the T212 ISA. SWDA is also the ETF Im invested in so your answer is very convenient. So If I understand correctly - on the 31/12 of each year I would receive additional shares or fractions of a share as my dividend is re-invested into the fund. And this will automatically compound my returns. And because Im using an ISA I dont have to worry about tax but If I ever invested outside of an ISA I would have to. Thanks for the response

You do not receive any extra shares. The reinvested income is just reflected in the share price of SWDA. Your number of SWDA shares does not change.

That explains why the price of the accumulating version of an ETF always exceeds that of the distributing version (if there is one), even though they may have been launched at the same price on the same date.

The largest holding in SWDA is Microsoft. Today the fund is worth $20.88 billion and owns MSFT shares worth $696 million. The dividends that SWDA receives day of day on its holdings in all 1,704 companies are continually being reinvested (after tax deductions) in more shares of these 1,704 companies. So your shares in SWDA tend to represent more and more ownership of MSFT as the years go by.

Today a share of IWDA is $48.66. MSFT is $164.85. So each share of SWDA (same as IWDA) contains 0.032*48.66/164.85 = 0.0094 shares MSFT.

Oh I see, Thank you for explaining. I think I misunderstood an explanation I was given by someone previously - or perhaps they didn’t fully understand it. Would you advise investing a fixed amount monthly into a distributing ETF and investing all dividends I receive back into it. Or investing a fixed amount monthly into an accumulating ETF, or perhaps both?

Up to you. There are pro and cons. I use both types.

Accumulating: you don’t have to remember to reinvest the dividends; the dividends are actually reinvested more efficiently, as that happens continuously rather than just 4 times a year.

Distributing: you can use the dividends to rebalance your portfolio, by investing them in some different investments than the one generating the dividends.

Tax reporting hassle if held outside an ISA: similar

It is worth looking at other aspects such as OCF, AUM, spread and liquidity. For example, ISF (distributing) is a larger fund than CUKX (accumulating), even though they are both iShares FTSE 100 trackers. The former has 9 times greater AUM (assets under management) and so is more frequently traded and usually has smaller bid/ask spread. Both have OCF of 0.07%, but according to hl.co.uk indicative spreads are 0.07% and 0.31% respectively.

Yh Ive been on justetf.com/uk a lot looking through all the different options and comparing multiple ETF’s. I’ll continue to do my research until Im at the point where Im not asking stupid questions on forums lol. Thanks mate you have been a big help.

@Richard.W

Could I pick your brain? :pray:t2:

I have shares in WHEA - it’s an accumulating fund. Held it around 6 months now.

I decided to calculate what I’ve invested so far (I top this fund up monthly) and I added onto the figure I’ve invested the amount it’s in the green and came out with a pretty much exact figure. If accumulating funds get interest sort of drip fed rather than paid in dividends wouldn’t I still see some increase in the amount I own?

Or is it more complicated than that?

I have googled and done some research but must be missing something as it’s not clicking.

Thanks for any help.

You haven’t actually shown what gains the fund has made during your investment period, this might help

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With an accumulating ETF the reinvested dividends do not buy you more shares. They simply increase the value of each ETF share. Each such share comes to represent an increasing quantity of underlying company stocks.

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I see so if it increases the share value would it be noticeable in the average price?

Here’s what the fund has gained with £111.90 being what I have invested so far.

So for instance if a share was worth (for arguments sake) £30 I could see that figure increase to £30.40 and that’s the price of the share increasing?

Just trying to figure it out. It’s a rainy day and I wanted to use some brain energy. Plus I’ve tired to understand it but sure I over complicate it.

I would consider this similar to buyback. You don’t see it, but it does effect the value of stock.

I don’t think there is visible display apart from buy/sell price increasing.

But then, I could be wrong. Not the first time. :partying_face:

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Just check your initial stock buy price in the history section and compare the increase with the current price this should tell you.
From what I gather and I’m no expert the increases in the share price are based on all earnings so not just stock valuation but also the reinvested dividends aswell.

Because you don’t own the shares in the companies you own the tracker fund, they invest the received dividends back in so it just increases the funds overall value

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Looking at the Holdings tab here

https://www.ishares.com/uk/individual/en/products/280507/ishares-sp-500-health-care-sector-ucits-etf

you can see what value of shares the ETF held yesterday.

Eg. JOHNSON & JOHNSON USD 151,927,284.18

When one of the constituent 69 companies pays a dividend that is used to pay taxes and to buy more shares in all the stocks proportionately. Your shares in WHEA represent a small fraction of that total holding of stocks. It is bit more complicated because iShares will create and destroy blocks of shares in line with demand. To see how much has been added to the value of a ETF share through reinvested dividends you can look at the literature document called “iShares V Reportable Income 2019”

So would you look roughly at this

As sort of a rough estimate of returns a year albeit it drip fed through an accumulation rather than a dividend pay out.

Thanks for the help guys I must admit I still don’t 100% get it but I’m happy with the fund and trust the accumulation process. Same with wisdom tree cloud computing.

I just presumed I might see a rise in share price but as it fluctuates daily/hourly perhaps this is harder to see than I presumed.

I need a dummies guide to accumulation :eyes:

Obviously this is past performance though so not indicative of your current or future gains.

The process is pretty easy as your share price is only linked to the fund so you won’t see any buy/sell/dividend activity through it (unless you read the report after)
If they lose 10% and gain 5% in dividends your share price falls 5% but you don’t see the actions

Sorry. I confused WHEA with the iShares similar fund IUHC. But the principal is the same. IUHC reinvested $0.11 per share in 2019. Since IUHC shares are now trading at $8.36 you can see that the dividend contributes only a very little to the total return, but had there been no reinvestment of of the $0.11 dividend during 2019 the share price would be logically now around $8.25.

It does also depend on whether the dividends were reinvested in an equal split manner or new stocks were purchased as this could affect the whole profitability chain