By the way, it does seem to me that Vanguard's a little slower answering the phone than they used to be... Anyway, the front-line rep transfers me to a "fund specialist." He looks up the fund, and has basically the same reaction Van and I had: "Hmmm, that's odd, hasn't been one since December. Maybe because the fund has been negative?" I say "Well, short-term bond index has been negative, too, but it has made distributions." He says "Well, I need to put you on hold to get a definitive answer." He comes back and my understanding, as repeated back to him and confirmed is: what is distributed is the combination of the coupon interest payments and the inflation adjustment in the principal, and if the sum of those two is negative, there is no distribution.
I vaguely remember that there is something like this in the regular TIPS fund, and it explains why the quarterly amounts fluctuate or something.
I am not going to bother to check details, maybe someone else knows them off the top of their head, it's enough for me to know that "the dividend payout rules for TIPS funds are weird because the inflation adjustment numbers factor into it in some way." That seems illogical since you have no access to the inflation adjustments until the bond matures.
I see that the Prospectus does say this (yes, I hold a very small amount of this fund, and, no, I didn't read the Prospectus when I bought it
The Fund is subject to income fluctuations. The Fund’s quarterly income distributions are likely to fluctuate considerably more than the income distributions of a typical bond fund. Income fluctuations associated with changes in interest rates are expected to be low; however, income fluctuations associated with changes in inflation are expected to be high. Overall, investors can expect income fluctuations to be high for the Fund.
That doesn't really answer the question of the precise rules by which the dividend payout is calculated.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.