Funds and dividend payments

[essayer]

Financial newbie here

Let's say I have 100 shares in Fidelity's Index US Fund 'W Acc' and right now they are worth £1.7563 each

http://www.morningstar.co.uk/uk/funds/snapshot/sna...

A bit confused about dividends and I'm sure the good people of PH can clarify better than Mr Google

In the most recent annual report there's an entry for final distribution of the W Acc shares - accumulated at 30 Apr 16 for example 2.1434p per share.

Does that mean that - had the holding qualified - it would have gained £2.14, and as it's an accumulation the holding increases to 100+(2.14/(share price)) shares?

Apparently dividends are paid 14 Jan / Apr / Jul / Oct. Is that amount distributed over the 4 periods - or each period?

Also, where does it say the dates you need to hold the fund to qualify?

[WindyCommon]

I'll answer the general question. You'll have to keep digging in the fund docs to answer the specific questions.

"Acc" typically signifies accumulation shares where dividends received on portfolio holdings are retained within the fund rather than being distributed. You won't receive additional shares, but the ones you hold will be worth more than their "Dis" counterparts.

[FredClogs]

The ex dividend date is found easily here... click on the little arrow to move to the next quarter. It's about 6 weeks before the div date.

http://www.hl.co.uk/funds/fund-discounts,-prices--...

That fund is "acc" which means dividends are re invested, you won't see them, the fund just gets bigger and bigger in it's holdings, if you want to generate an income from the fund you need to switch the "income" version of the fund, with an "acc" fund it matters little what the ex dividend date is to you, the value of your holding in the fund is entirely based in the value of the underlying equity, in this case the S&P500 index.

[essayer]

Thanks both.

Ok so for Acc it's not distributed, the fund theoretically just goes up in value because it owns more shares..? So the share price would go up in some proportion?

So would another approach be to buy the Income shares and use the money to reinvest into more/other shares? Or would that be silly?

Edited by essayer on Tuesday 4th April 10:24

[FredClogs]

essayer said:

Thanks both.

Ok so for Acc it's not distributed, the fund theoretically just goes up in value because it owns more shares..? So the share price would go up in some proportion?

So would another approach be to buy the Income shares and use the money to reinvest into more/other shares? Or would that be silly?

Edited by essayer on Tuesday 4th April 10:24

No, the price of the fund is tracking the S&P500 index, just because it has more holdings doesn't mean the fund price will go up... It could go down, there is just more of it to go down.

As for your second question it depends on whether you think you want to spend time and emotional energy on trading or not. I have some funds that generate an income which I use to pay the platform fees and to gamble a bit with some shares. But on the whole if you're in it for the long term and your strategy is to buy tracker funds then it probably best to just let it accumulate.

Edited by FredClogs on Tuesday 4th April 10:54

[WindyCommon]

FredClogs said:

No, the price of the fund is tracking the S&P500 index, just because it has more holdings doesn't mean the fund price will go up... It could go down, there is just more of it to go down.

Edited by FredClogs on Tuesday 4th April 10:54

That's not quite right Fred. The S&P500 index value that we see quoted is a price return index which means it doesn't account for dividends. The acc shares of the fund that the OP owns will outperform the quoted index by the value of the (reinvested) dividends.

[FredClogs]

WindyCommon said:

That's not quite right Fred. The S&P500 index value that we see quoted is a price return index which means it doesn't account for dividends. The acc shares of the fund that the OP owns will outperform the quoted index by the value of the (reinvested) dividends.

Ok, fair enough.

[LeoSayer]

Here's an example.

Fund A is an Acc fund and Fund B is Inc class of the same fund.

Both launch at a price of 100.

The day before xd date, the price rises to 107 due to investment performance, dividends on shares within the fund etc.

At xd date, both funds declare a dividend of 3. The price of A stays at 107 but the price of B drops to 104.

The price drop is simply because the value of the fund has dropped by 3* number of unit holders. The number of shareholders stays the same.