No dividend with 401K Reit idx fund

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Topic Author
rks
Posts: 35
Joined: Fri Mar 21, 2014 1:54 pm

No dividend with 401K Reit idx fund

Post by rks »

We have a 401k plan from IBM where some money is invested in Reit Idx fund. We noticed that in last two years we held the fund there has been no dividend payment at all. We even called Fidelity that manages the IBM plan and they told us that this fund is institutional fund, and there is no visibility at all when/if they paid any dividend.

Is this expected with institutional funds that they do not pay any dividend at all esp with a fund like Reit? Is there no way to find out if such a fund paid any dividend at all? We are now thinking of getting out of this fund. Note the following excerpt from the fund description talks about dividend yield though.

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Because the Real Estate Investment Trust Index Fund emphasizes REIT stocks, its performance is strongly linked to the ups and downs of the real estate market. Some factors that affect real estate values include supply and demand for properties, the overall economic health of the country or particular regions of the country, and the financial health of individual companies that rent property. Over the long term the fund's return should be closely linked to the fund's high dividend yield.
lack_ey
Posts: 6701
Joined: Wed Nov 19, 2014 10:55 pm

Re: No dividend with 401K Reit idx fund

Post by lack_ey »

This structure as an investment trust is common in 401k plans and the likes. Distributing and managing dividends is just a minor hassle for portfolio managers that's a requirement for a mutual fund but not so here. These investment trusts in 401k plans don't have to put up with as much of these things (on the administrative side too, including not having a ticker symbol and maybe all the documentation required for a mutual fund) and can just reinvest those dividends and move on, saving some costs.

There are institutional mutual funds that behave as mutual funds. The investment trusts are different.
Topic Author
rks
Posts: 35
Joined: Fri Mar 21, 2014 1:54 pm

Re: No dividend with 401K Reit idx fund

Post by rks »

Thanks lack_ey for the response.

So does it mean that the fund may have re-invested the dividend? Unfortunately I do not see any change in no. of units of the shares due to this re-investing (if it happened at all). I wonder if the fund value itself got readjusted to account for any dividend?? It is frustrating that we could not find this information from the Fideltity 401K guys.
Bondman
Posts: 25
Joined: Sun May 08, 2016 6:06 pm

Re: No dividend with 401K Reit idx fund

Post by Bondman »

I wonder if the fund value itself got readjusted to account for any dividend
I believe this is how it works. Your # of shares don't go up, nor do you see the actual dividend distributions. However, they should be incorporated into your share value as an increase.
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telemark
Posts: 3389
Joined: Sat Aug 11, 2012 6:35 am

Re: No dividend with 401K Reit idx fund

Post by telemark »

The wiki entry is http://www.bogleheads.org/wiki/Collecti ... ent_Trusts. In
particular see
Dividend reinvestment. A CIT does not make dividend distributions. Dividends are added and accumulate in the net asset value of a CIT share.
FactualFran
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Joined: Sat Feb 21, 2015 1:29 pm

Re: No dividend with 401K Reit idx fund

Post by FactualFran »

Bondman wrote:
I wonder if the fund value itself got readjusted to account for any dividend
I believe this is how it works. Your # of shares don't go up, nor do you see the actual dividend distributions. However, they should be incorporated into your share value as an increase.
That is how it works for almost all non-bond mutual funds between fund distributions. The fund receives dividends from its holdings and those dividends become part of the net assets of the fund.

Mutual funds make distributions to the shareholders of the fund to avoid paying taxes on the dividends that the fund receives. With a fund that is available only in a tax-advantaged account, there are no taxes for the fund to avoid.
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