It is fast approaching that time of the year… dividend time! Let’s see what this could mean for you and some of the ETFs available in the Raiz Portfolios.
But first we should cover the basics.
What is a dividend?
If a company makes a profit and wants to return some of this cash to its shareholders, it can do so by paying a dividend. When the underlying stocks of the ETFs which make up the Raiz portfolios pay dividends, they are distributed by the ETF and automatically reinvested back into Raiz accounts.
When an ETF announces a dividend, there are two key dates to look out for; the Ex-Dividend Date and the Dividend Payment Date.
Ex-Dividend Date: This is the date that the dividend is effectively put to the side in preparation to pay ETF holders. On this day, the ETF should reduce in value by the same amount as the dividend that is due to be paid soon thereafter. This is why the market may report the ETF on ex-dividend day as trading down, even if the stocks contained in the ETF have not moved. But fear not, because then comes the highly anticipated…
Dividend Payment Date: This is the date the dividend money is received and will automatically be reinvested into Raiz accounts within 1-2 business days.
(For more useful definitions that help you get on top of financial lingo, check out our Raiz-opedia blogs).
So, when will I receive my dividends?
Every Raiz portfolio receives dividends, some quarterly, some half yearly, and most months the AAA ETF pays interest income as a dividend. To receive the dividend, you just need to have a balance on the ex- dividend date, and then Raiz will automatically reinvest your share of the dividends soon after the dividend payment date. January is the magic month when it comes to dividends! Every single ETF that can be held within a Raiz portfolio is expected to report a dividend, with most of these expected to be paid in mid to late January 2022.
Many stocks around the world have Dividend Reinvestment Plans (DRP), which means they encourage stockholders to reinvest the cash they receive back into the stock, which can then take full advantage of the value of compounding returns. You can think about how Raiz approaches the auto-reinvestment of dividends into your account the same way.
But if you ever need or want to pay yourself a dividend, there are no fees to withdraw from Raiz. That’s the beauty of the setup. We give you the best chance to take advantage of compounding returns, but the convenience of accessing your money at any time.
Like any financial product, investing in ETFs carries risk.
To see if Raiz is suitable for you, please read the PDS.
To view Raiz fees, click here.
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