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I was looking at ETFs and noticed that etf like QQQ, DIA( Ex date is 09/20/2019 but pay date is 10/15/2019) pay dividends about 5 to 6 weeks after the Ex-Dividend date . But other etfs (e.g IVV, VOO) pay dividend in less than 1 week after the ex -dividend date. Please see screenshots below.

My Question is why is that? Why some ETF companies are holding the money for 5-6 weeks, but others are able to pay with in a week?

DIA Dividend Dates

QQQ Dividend Dates

IVV Dividend dates

Note: This question is simply asking what is the logic( reason) behind such delay ( by some etf)or not delay (by some etf) in paying the dividend. No one is asking suggestion if one should chose what kind of ETF, rate of return. No one is asking that ETF value goes by the dividend amount etc. And even in same ETF category like S&P 500 some ETFs are paying in 1 weeks( VOO and IVV) and some are paying in 5-6 weeks (SPY).

Raj
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2 Answers2

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The simplistic answer is that Ex Dates and Payment/Payable Dates serve different purposes, so there is no intrinsic reason why they should be the same.

Ex Dates are administrative - they serve to indicate whether someone is entitled to the upcoming dividends.

Once the company sets the record date, the ex-dividend date is set based on stock exchange rules. The ex-dividend date for stocks is usually set one business day before the record date. If you purchase a stock on its ex-dividend date or after, you will not receive the next dividend payment. Instead, the seller gets the dividend. If you purchase before the ex-dividend date, you get the dividend. - Ex-Dividend Dates, Investor.gov

Payment/Payable Dates are transactional: companies need to actually make payments to shareholders.

Payment date is the day when the dividends will actually be distributed to the shareholders of a company or credited to brokerage accounts. - Introduction to Dividends, Boundless Finance

The rest of this answer is an educated guess. (This answer is not to be taken as financial advice.)

Directors determine the amount paid out at each dividend. They may consider various factors, but once they have made the decision, they are sitting on insider information. So it makes sense for them to release that information (the Record Date and the amount of the dividend) as quickly as possible.

Since money is paid out, the company might want to check and recheck to ensure they got it right before authorising payment. Hence it makes sense for some time to pass between the Ex-Date (or more to the point, the Record Date) and the Payment/Payable Date.

Lawrence
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Summarizing some lengthy comments in a vague answer:

  • I have not found any published explanation of their ex-dividend period choice, so it would probably take an insider to explain that strategy
  • The impact of a "longer" ex-dividend period to you is minimal - just the time value of the dividend itself. The dividend is a wash from a value standpoint (the value of the fund goes down by the amount of the dividend).
  • The underlying stocks pay dividends at various times, so you should not assume that the fund receives all dividends at once and is sitting on cash for 5-6 weeks just waiting to pay it out. One possibility is that they declare an ex-dividend date that gives them enough time to 1) qualify for all of the underlying dividends, 2) receive the dividends, 3) prepare a dividend payment to holders. But that is just speculation.
D Stanley
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