How much do you get from mutual fund dividends?

Question

How does a mutual fund decide how much it will pay out in dividends at the end of the year? Is it based on a percentage of the value gained during the year? Could someone give me a general idea if nothing else?

Answer 1

It depends on what stocks or bonds are in the fund. Most bonds will only pay a interest rate of the banking systems. Low interest rates of one year will gain low pay outs. With stocks, if the companies pay high dividends then you can gain more than with low paying companies. The key words are growth fund for example. That means the fund is loaded with high dividend stocks. Companies decide how much dividends they are going to pay share holders. Some will offer more than others. In mutual funds, the manager could drop one stock for another, so you can't really calculate. What is done is to look at the past years pay outs and get a idea of what to expect from that fund.

Answer 2

Dividends are based off of the companies performance.....so if your mutual fund put your money in a company that went down by a 50% rate your dividend rate would go down 50%

So it is based off of the value gained during the year.....

Answer 3

Mutual Funds are an investment in stocks and bonds by a fund manager for the mutual benefit of the investors. The dividends paid are a result of the return on the investments (interest and stock dividends) minus the loads and fees charged by the fund and the brokerage. Whatever is left after the expense is the net dividend. The actual amount varies based on the performance of the investment as well as the cost of fees. The cost can vary greatly from one firm to the other.

Answer 4

Your mutual fund shares represent proportional ownership of the stocks held by the fund.  Hypothetical situation.  Say you buy a mutual fund that owns only one stock (crazy I know, but bear with me).  Your dividend yield is same as the stock owned by the mutual fund (Yes, fund fees can drag down the yield.  But fund fees can come from dividends or from the sale of stock).

For real life mutual funds, the dividend distribution is simply the sum of the dividends paid by the stocks owned in the mutual fund.  Note that some mutual funds have a dividend focus, buying stock in companies with strong yields.

Most mutual funds give investors the opportunity to re-invest dividends and capital gains distributions.  If you chose this option you won't see any cash.  Instead, you'll own more shares of the mutual fund.

So the answer is, it depends.  Dividend yields vary based on the underlying holdings of a mutual fund and its focus on value vs. growth.