You don't have credit card details available. You will be redirected to update payment method page. Click OK to continue.
For ETFs, what happens to the dividends and franking they would receive as owners of a share? Do they make a distribution to the owners of an ETF, and if so owners at what time relative to the ex-date of the shares the ETF owns?
Also, I note that Wilson asset Management is proposing to set up a Lick of LICs, to follow Geoff Wilson’s long espoused philosophy of selling LICs that are trading at a premium to NTA. Comments?
A: ETFs are trust structures and act as “pass through” vehicles. They typically distribute at the end of a calendar quarter or half year. Unlike LICs which are companies, there is no discretion as to what they will distribute – they distribute in full all the income they have received (dividends and interest on their investments, realized capital gains). At the end of the financial year, they will reconcile the distributions and advise you of the tax components (typically, you will get any of the franking credits they receive).
Because the timing of dividends in Australia is lumpy (concentrating in the Feb/Mar and August/September periods), ETFs that track the Australian sharemarket (for example, VAS or IOZ) have lumpy distributions – the April and October distributions are typically a lot higher than the distributions paid in January or July.
With regard to the proposed WAM Strategic Value Limited LIC, this looks interesting. Buying $1.00 of assets for 80c is exactly what Geoff Wilson has done over many years – so on paper, he should be able to make this work. The caution however is that realizing the value in mispriced assets can often take a long time, so it could be somewhat of a slow burner in terms of returns. Investors will need to be patient.
I will reserve judgement until I have seen the prospectus, but certainly I want to learn more about it.
