# TD e series ex dividend date (or ex-distribution date?)



## Jungle (Feb 17, 2010)

The "once a year" distribution payment is coming for the TD e series CDN and US index funds. Anyone know when the ex-dividend or ex-distribution date is? 

From the last 3 years, the dividend payments have been Dec 21, Dec 19, Dec 18. 

Just wondering if it's too late to make a lump sum, e-series contribution, to take advantage of the yearly paid dividend, err, distribution.


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## cardhu (May 26, 2009)

What would you hope to gain by doing that? There is no advantage, and if you hold the funds in a non-reg account there is a substantial disadvantage. 

Barring normal daily fluctuations, the fund’s unit price will drop by EXACTLY the amount distributed … so if you buy $10k worth of funds and they distribute $1k which gets reinvested, you’ll then own $9k + $1k = 10k worth of funds.


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## Jungle (Feb 17, 2010)

I looked at the price history in the CDN e-series and it dips on the day of the dividend payment, but seems to resume normal pattern before and after. What if you make a lump sum like a week before the ex-div date? 

Let's say it pays a 2% dividend. Assuming the market remains flat, and you invest $10,000, wouldn't the dividend payment put you up to $10,200 after the price goes back to normal?


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## humble_pie (Jun 7, 2009)

jungle the conventional wisdom urges investors to not, repeat not, purchase any fund, immediately prior to its X date, that will soon pay out a large end-of-fiscal-year distribution.

the reason is that although investor will take the full tax hit on the distribution, he has not been in the fund since the early part of the year, and therefore his brand-new investment has not had any opportunity to benefit from the rise in fund's share price that has occurred throughout the year (this is the same rise that has caused the capital gains distribution, so they're sort of like siamese twins but joined only at the knee.)

if td has not already announced the dates, amounts & breakdowns of these dividends, they will soon. You'd want to look at the amount breakdown to see whether you'd be receiving eligible dividends, capital gains, returns of capital, foreign income, other income, or a mixture of some or all of these.

there's a big difference between attempting this in registered accounts, where the tax burden is non-existent or delayed, and attempting this strategy in non-registered accounts, where the full tax burden is borne immediately.


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## cardhu (May 26, 2009)

Jungle ... if the market remains flat, and you invest $10,000, a 2% distribution (reinvested) would put you up to $10,000 ... not $10,200.
There is no advantage in doing this ... none whatsoever ... mutual fund distributions do not add to your wealth, they merely rearrange it. 

Before distribution, you own 1000 units at $10 each = $10,000.00
You receive distribution of $0.20 per unit, $200 total, which gets reinvested at a price of $9.80 each.
After reinvestment, you own 1020.4082 units at $9.80 each = $10,000.00

The price history leading up to, and following, the distribution date are just normal market fluctuations, and have no bearing on this fundamental principal.


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## Jungle (Feb 17, 2010)

Thanks for the explanation guys, I never knew or understood this before. 
WOuld it be better to make a lump sum payment on the distribution pay date, since the price is lower? THis is in a registered account. 

Thank again.


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## humble_pie (Jun 7, 2009)

jungle the key dates are the day before the X date and the X date. The payable date is largely irrelevant.

what our fellow member is describing is the theoretical structure of what happens with every dividend or distribution. However in real financial life this effect - of reducing the market value of the underlying by the exact amount of the dividend - is notional only. The effect subsists for a few premarket minutes or hours leading up to market open at 9:30 am the morning that the stock, or fund, goes X.

as soon as the market opens, market forces will sweep in seamlessly & obscure the notional drop in the underlying's market price. On a down market day, the share price will drop even further than the dividend amount. On an up market day share price could rise from the notional low created by the dividend payout. On a soaring market day share price could even eclipse & rise above the previous day's close (that having been the last day before the X date, or to put it more picturesquely, the last day on which the stock or fund was still pregnant with the dividend.)

things are slightly different for a fund in that it doesn't get priced until the end of a trading day. However, the fund consists of securities that do trade, and the same market forces will drive these individual securities. An investor can guesstimate on an X date whether his fund will be declared up or down on that X date, particularly when it's an index fund, but he won't know for sure until after markets close & the price is announced.

furthermore, it will not be true that an investor who comes in with new money to buy a fund on the X date that was valued the night before the X date at 10.00, and that paid a dividend of .20, will pay exactly 9.80.

if you are counting on such a drop in order to pay less for a new investment, this is a false hope. Look carefully at cardhu's post. He is not talking about new subscriptions, he's talking only about reinvestment of dividends for existing fundholders. For new funds, i believe that an investor buying on the X date will pay whatever the market close dictates that that fund's price will be on that particular X date. 

as you can see, everything boils down to what an investor might predict the market will be doing on the X date. Will the market rise strongly ? if so he should buy before the X date. But what if the market should fall badly ? if so he should delay ...

lastly, as i mentioned previously, the tax consequences in a registered account are largely irrelevant, so one could buy as one pleases.


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## cardhu (May 26, 2009)

Jungle ... it would be neither better nor worse to buy on the distribution date ... it would make no difference whatsoever, from the distribution point of view ... when you hold the fund in a registered account, there are no tax implications, and a reinvested distribution is merely a neutral bookkeeping entry ... it has no effect on your investment returns and no effect on your overall wealth ... it is completely transparent. 

The key date is the date on which the distribution is made ... the days before and after the pay date are irrelevant. 

As I mentioned previously, when a mutual fund makes a distribution, the unit value is adjusted downward by *exactly* the amount of the distribution ... there is nothing notional or theoretical about this effect ... in real financial life, this is *exactly* what happens. 

Our fellow member appears to be confusing the behaviour of mutual funds with the behaviour of individual stocks, but mutual funds are not individual stocks ... and individual stocks are not mutual funds ... with a dividend paying stock, there is no direct correlation between the share price and the dividend paid, but with mutual funds, there is ... the correlation is direct, measurable, and consistent. 

Of course it is true that in the circumstances described in my previous post, an investor who comes in with new money to buy a fund on the distribution pay date, that was valued prior to distribution at $10.00, and that paid a distribution of 0.20, will pay * exactly* 9.80 per unit for his new purchase ... this is entirely predictable. However, your question pertained to a flat market, which is a rarity ... the reality is that ordinary market fluctuations can and do occur on the same day as distributions ... the effect of these ordinary market fluctuations is superimposed on top of the unit value adjustment referred to above, but it is a distinct and separate effect, and has no bearing on the reality that the unit value drops by *exactly* the amount of the distribution. 

As you can see, a reinvested distribution is a transparent bookkeeping adjustment that has no effect on your investment returns or your wealth. Abandon this focus on the distribution pay date, and choose your entry point the same way you would any other investment.


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## Jungle (Feb 17, 2010)

cardhu said:


> As I mentioned previously, when a mutual fund makes a distribution, the unit value is adjusted downward by *exactly* the amount of the distribution ... there is nothing notional or theoretical about this effect ... in real financial life, this is *exactly* what happens.



Thanks for the explanations. So the mutual fund is adjusting lower in price, to spew out the distribution. This would mean the distribution payment is already built into the price of the fund, or adjusted as you said. Making it a neutral effect. 

So, would this be correct: If the markets remained flat forever, and the mutual fund spit out this distribution on a regular schedule, eventually the fund price keep decresing and become worthless? 

Does the mutual fund get the distribution from ROC? Selling underlying units to distribute money?


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## cardhu (May 26, 2009)

NO, of course a mutual fund would never distribute itself into oblivion ... it can’t happen

Jungle, take a step back and consider why a mutual fund issues a distribution in the first place. They don’t do it just to put cash in your pocket. (Yes, there are some mutual funds specifically designed for that purpose, but neither of the funds you mentioned is among those). The reason a mutual fund issues a distribution is to shift any taxable income/gains that have accrued within the fund, into the hands of the investor so that the investor pays the taxes instead of the fund. Generally, if they have not accrued any taxable income/gains, then they won’t issue a distribution. And I believe that for funds like the ones you’ve mentioned, the vast majority of investors opt to reinvest distributions automatically, so that very little money actually leaves the fund in any event. Most of it stays within the fund for continued investment, but subject to the various accounting adjustments. 

Also consider that a “flat market” does not necessarily mean a flat mutual fund unit price. Even if the share prices are frozen forever, any dividend income or other income that is paid into the fund will temporarily increase the unit price, until it is distributed. Some funds distribute monthly, others quarterly, and some (like the ones you mentioned) annually. So even with share prices frozen, the unit price of the mutual fund will fluctuate, as dividends/interest/etc. are received into the fund, and then paid out of the fund again. You can sometimes see this in the charts, as a very regular, repetitive and predictable pattern. 

Here’s the previous example, reworked to your flat-market-forever scenario. 

*Year 1*
Beginning of year, you own 1000 units at $10 each = $10,000.00
During the year the fund receives, but does not distribute, dividends, and your stake grows to 1000 units at $10.30 each = $10,300
At end of year, you receive distribution of $0.30 per unit, $300 total, which gets reinvested at a price of $10.00 each.
After reinvestment, you own 1030 units at $10.00 each = $10,300.00

*Year 2*
Beginning of year, you own 1030 units at $10 each = $10,300.00
During the year the fund receives, but does not distribute, dividends, and your stake grows to 1030 units at $10.30 each = $10,609
At end of year, you receive distribution of $0.30 per unit, $309 total, which gets reinvested at a price of $10.00 each.
After reinvestment, you own 1060.9000 units at $10.00 each = $10,609.00

etc.
etc.

Note that your investment grows, even though the share prices remain frozen and the market remains “flat”. 
Note that the long term unit price of the fund remains pretty flat, but subject to very regular and very predictable up & down blips.
Note that the unit price is adjusted downward by exactly the amount of the distribution, in every case.


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## Jungle (Feb 17, 2010)

Now they just did the distribution on Friday.I think I finally get this. 

TDB900 has out performed the TSX comp (no dividends) for one year by around 2% or so. This is because the daily closing price of TDB900 includes the dividends through out the year. ("total return") Check out this one year graph of the TSX and TDB900 side by side. 
http://www.google.ca/finance?chdnp=...e&cmpto=MUTF_CA:TDB900&cmptdms=1&q=TSE:OSPTX&

TDB900 with out distribution ends up .32% lower which is the same amount of the MER on the fund. 

So then once a year it spits out the distribution lowing the price of the fund by the amount of the distribution. THe net effect being you received the return of the TSX + dividends over one year.


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## allgood (May 17, 2010)

Does anyone know when the distribution will show up in TDwaterhouse accounts?


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## eulogy (Oct 29, 2011)

I noticed that it shows dividends paid for me Dec 15th.


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## Jungle (Feb 17, 2010)

I have not received my distributions for tdb900 in my tfsa in TDW. However in TD Mutual funds I did receive it.. I'm thinking it will show up tomorrow as TDW seems slow to update account activity.


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## Spudd (Oct 11, 2011)

I got my distributions in TDW today.


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