Suppose an investor owns a bond ETF for 1 month and sells without waiting for the date of income distribution, will he still get paid an income for owning the bond ETF for 1 month? This does not work for stock dividends. I am wondering if it is different for bond ETFs.
Your ETF will return the interest as dividends. If you hold the ETF on the day before the Ex-Dividend date, you will get the dividend. If you sell before that, you will not. Note that at least one other answer to this question is wrong. You do NOT need to hold on the Record date. There is usually 2 days (or so) between the ex-date and the record date, which corresponds to the number of days it takes for your trade to settle. See the rules as published by the SEC: http://www.sec.gov/answers/dividen.htm
Bond ETFs are traded like normal stock. It just so happens to be that the underlying fund (for which you own shares) is invested in bonds. Such funds will typically own many bonds and have them laddered so that they are constantly maturing. Such funds may also trade bonds on the OTC market.
Note that with bond ETFs you're able to lose money as well as gain depending on the situation with the bond market. The issuer of the bond does not need to default in order for this to happen. The value of a bond (and thus the value of the bond fund which holds the bonds) is, much like a stock, determined based on factors like supply/demand, interest rates, credit ratings, news, etc.
There are two 'dates' relevant to your question: Ex-Dividend and Record. To find out these dates for a specific security visit Dividend.Com.
You have to purchase the security prior to the Ex-Dividend date, hold it at least until the Record Date. After the Record Date you can sell the security and still receive the dividend for that quarter.
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I was wrong. If you sell the security after the Ex-div date but before the date of record you still get the dividend.