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Let's say that I have 100 shares of the SPYD ETF. The current Annual Dividend/Yield is $2.27/5.47%.

Is that the case that after a year I'm going to get paid 100 * 2.27 = $227.00?

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    Note that the dividend is not "income" to you - it's a "distribution" of ~2.27% of your investment - the value of the ETF will go down by the same amount.
    – D Stanley
    May 7, 2021 at 19:42
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    Is it not the other way round? You are paid Dollars and calculate the percents retrospectively from the sum of Dollars and the current price per share. May 8, 2021 at 22:53

1 Answer 1

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Published dividend yield is calculated based on the current unit/share price and most recent annualized distribution. Your yield will change over time as you receive dividends.

Assuming you paid the current price of $41.68 per unit for your 100 units of SPYD, your cost basis is $4,168. If the distribution holds to the most recent paid of $0.6362/unit your annual distribution will be $2.5448/share or $254.48 for a yield of 6.1%.

If, next year the unit price is $61, and the quarterly dividend is up to $0.85/unit, the published yield will be something like 5.6% ($0.85 * 4 / $61); but your yield will be based on your purchase price of $41.68, so $0.85/unit would be 8.2%.

Distributions tend to fluctuate over time. The actual most recent annual distributions sum to $1.9026

03/24/2021     $0.6362
12/23/3030     $0.6066
09/23/2020     $0.2636
06/24/2020     $0.3962

If you had bought in June 2020, the unit price was around $28.50; the published yield at the time would have been something like 5.6% ($0.3962 * 4 / $28.50). In the last year you would have actually received $190.26 for your 100 units which cost you $2,850 for an actual annual yield of 6.6%

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  • Also your calculation of "your yield" may be a bit confusing. I've never considered "yield" to be based on the purchase price, but rather the current value of the investment. Say I bought an ETF 50 years ago for $1, and it's now $100 and pays a $1 dividend. Is my "yield" 100%? I'd argue that it's still 1% since I could sell the etf for $100 so my choice to stay in the ETF has a "cost" of $100.
    – D Stanley
    May 7, 2021 at 19:16
  • A lot of people harp on your first point about 'what is the value of a dividend' if it comes out of the investment; and that's fine for someone else to write; I think it wildly over complicates a relatively simple concept. Buffet also refers to distributions this way in the Berkshire Annual Reports. My investment has a current value, sure, but I didn't buy it at the current value I bought it where ever I bought it; and part of the value of very long term holding can be very high dividend yields relative to your initial investment. I don't disagree with you but I'm happy with what I wrote.
    – quid
    May 7, 2021 at 19:39
  • fair enough - I've moved it to a comment on the question rather then getting construed as a critique of your good answer.
    – D Stanley
    May 7, 2021 at 19:43

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