ETF


BlackRock iShares recently changed several of their ETFs to a monthly distribution.  I don’t know the full details of the reasons behind the change, but I imagine that iShares is trying to attract people looking for monthly cashflow to meet their living expenses (retirees, etc.).  Unfortunately, the change comes at the expense of small investors still in the accumulation phase of their investing life since a monthly distribution means that a larger amount of shares will be needed to satisfy most synthetic DRIPs that require at least one whole share to be purchased.

For example, before the change to a monthly distribution, a holder of 100 shares of XDV received $19.25 the last quarter (June 2010); enough to purchase 1 whole share through a DRIP.  After the change, the same investor received $9.64 for July’s monthly distribution, not nearly enough to DRIP a full share at the current share price of $19.05.

To rectify the situation I believe iShares should issue a one-time 3 for 1 stock split for the ETFs impacted by the change in distribution pattern (since a change from quarterly to monthly divides the distribution by 3 on average).  The split will not impact investors looking for monthly income and will help those looking to accumulate more shares through a DRIP.  iShares will also benefit since the distribution will be reinvested in their funds (instead of sitting in cash in the investors accounts, etc.)

If anyone agrees, please let me know how we can convince iShares to issue a 3 for 1 split!  Hopefully they will listen to the little guys!

Disclaimer:  This blog has no professional association with any organizations or companies mentioned in the article.  The contents of the article are the personal opinion of the author at the time the article was posted and may be subject to change.  The blog and author are not responsible, nor will be held liable for any content posted by others in the blog comments.  Readers should complete their own due diligence prior to making any personal decisions.

Preet Banerjee (Where Does All My Money Go.com) had a great post yesterday about BMO’s plan to rename several of their index mutual funds.

BMO’s plan to me is a sneaky way to cash in on the continuing move by investors towards ETFs.  Preet makes a great point  that this will just add confusion.  Having “ETF” in the name of a mutual fund will make the simple concept of ETFs more complicated for new investors.

I encourage you to visit Preet’s blog…