The Vanguard Australian Shares Index ETF (ASX: VAS) unit price is seemingly plummeting today. VAS units closed at $97.21 each yesterday. But upon market open this morning, this popular ASX exchange-traded fund (ETF) opened at just $94.91 a unit. It’s currently asking $95.08, down a nasty 2.2%.
And yet the S&P/ASX 300 Index (ASX: XKO) – the benchmark index that VAS tracks – is actually up by 0.1% today thus far. So what on earth is going on? Isn’t VAS an index fund, designed to almost exactly mirror the ASX 300?
Well, yes. But today is an exception. The Vanguard Australian Shares ETF is not falling due to some strange decoupling from its index. Rather, it is falling because this ASX ETF has just traded ex-dividend distribution for its upcoming investor payment.
VAS price falls, but thank the dividend distribution
Yes, VAS pays dividends, although they come in the form of dividend distributions due to its ETF nature. The ASX 300 is an index comprised of the 300 largest companies on the ASX by market capitalisation. That means everything from Commonwealth Bank of Australia (ASX: CBA) and Woolworths Group Ltd (ASX: WOW) to Harvey Norman Holdings Limited (ASX: HVN) and Ampol Ltd (ASX: ALD).
Since this ETF holds all 300 or so companies in the ASX 300 Index in its underlying portfolio, it receives dividends from any companies in the index that pay them. In the ASX 300’s case, that is most of them, at least when it comes to the larger holdings.
So VAS is obligated to pass these dividends on to its investors. Vanguard does this every quarter, so investors can expect a dividend distribution every three months or so.
This is what is occurring today. VAS’s upcoming distribution, covering the quarter ended 31 March 2021, has just traded ex-distribution, meaning that any new investors from today won’t receive the next payment. This is due to be doled out on 20 April. This payment will be worth 199.8517 cents per unit.
This payment brings VAS’s trailing 12-month distributions to $4.66 per unit. On current pricing, that gives the Vanguard Australian Shares Index ETF a trailing yield of 4.9%.