Q: How frequently are dividends paid out on exchange-traded funds?
A: Exchange-traded funds (ETFs) are securities that track a basket of stocks. They're essentially mutual funds that trade like stocks.
There are ETFs that track dozens of popular indexes ranging from the Standard & Poor's 500, Nasdaq 100 and the Russell 2000.
And when stocks owned by the ETFs pay a dividend, investors are entitled to them. Interestingly, though, many ETFs handle dividend payments very differently.
The most common method combines all the dividends paid by the companies in the ETF during the quarter and then pays the investor shortly after the quarter ends. But some of the ETFs' dividend cycles are a little different.
For instance, the SPY, a popular ETF that tracks the Standard & Poor's 500, last paid a dividend shortly before the end of the second quarter on June 16, 2006. Prior to that, it paid on March 17, 2006.
Not all ETFs pay dividends quarterly. Due to the structure of some ETFs, they pay dividends as soon as they're paid by the companies. One ETF like that is the Holdrs Pharmaceutical (PPH). This ETF has paid 21 dividends this year, as the stocks it owns pay dividends.
Yet others pay less frequently than every quarter. This is often the case with ETFs that own foreign stocks, such as the iShares MSCI EAFE (EFA) and the iShares MSCI Emerging Markets fund (EEM). Both of these funds pay dividends once a year.
You can find out when ETFs pay dividends from ETFconnect.com.
Matt Krantz is a financial markets reporter at USA TODAY. He answers a different reader question every weekday in his Ask Matt column at money.usatoday.com. To submit a question, e-mail Matt at firstname.lastname@example.org.