How is the Vanguard Australian Shares ETF (VAS) falling almost 1% today?

Investors should be happy to see this index fund drop today. Here's why.

| More on:
ETF written on cubes sitting on piles of coins.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

It's been a decent, if not spectacular, start to the short trading week for most ASX shares this Tuesday. At the time of writing, the S&P/ASX 300 Index (ASX: XKO) has advanced by 0.12%, putting the index at just over 7,850 points. But let's talk about what's going on with the Vanguard Australian Shares Index ETF (ASX: VAS).

VAS units are seemingly not enjoying the same kind of goodwill as the ASX 300 index that it tracks. This exchange-traded fund (ETF) ended last week at $98.84 per unit. But this morning, those same units opened at $98.50, and have since fallen to just $98.05 each at present. That's a drop worth a not-insignificant 0.8%.

This is rather strange at first glance. After all, VAS is an ASX index fund that just happens to track the ASX 300 index itself. That means that these two instruments should, at least in theory, mirror each other almost exactly. So to see a divergence like this is highly unusual.

Well, it would be, if we didn't have a fairly simple explanation as to what's going on in this particular situation.

Why are VAS units taking an ASX hit today?

Today is the Vanguard Australian Shares ETF's ex-distribution day.

Last week, we warned that the latest dividend distribution from this ASX ETF was incoming. Vanguard recently revealed that the latest quarterly dividend distribution, covering the three months to 31 March 2024, would be worth 84.9 cents per unit.

That is a pleasing 47.1% rise over last year's quarterly dividend of 57.7 cents that investors received for the same period.

It takes VAS' full-year ASX payout to $3.74 per unit.

However, as we warned last week, the last day investors could buy VAS units on the ASX with the rights to this payment attached was last Thursday. Today is the day that Vanguard scheduled its index fund to trade ex-distribution for this upcoming payment.

This means that from this Tuesday, VAS units don't come with the rights to receive this dividend distribution, and any new investors will have to wait for the next quarterly payout.

As such, those Vanguard units just became inherently less valuable. And as a result, we are seeing a bit of a fall in the fund's value on the ASX this morning. This is a normal occurrence anytime an investment goes ex-dividend (in this case, ex-distribution).

Eligible Vanguard investors can now look forward to receiving their dividend later this month on 17 April.

At the current Vanguard Australian Shares ETF pricing, this index fund has a dividend distribution yield of 3.81%.

Motley Fool contributor Sebastian Bowen has positions in Vanguard Australian Shares Index ETF. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Dividend Investing

Five happy friends on their phones.
Dividend Investing

Buy Telstra and these ASX dividend shares next week

Analysts think these could be great income options for investors.

Read more »

Australian dollar notes inside the pocket on jeans, symbolising dividends.
Dividend Investing

How I would generate $20,000 of passive income from ASX shares each year

Here's how I would generate huge pay checks from the share market.

Read more »

Three generations of male family members enjoy the company as they plan future financial goals together on a trek outdoors.
Dividend Investing

3 'forever' ASX dividend shares to build your wealth

I think you can happily buy these three stocks to hold for your entire life today.

Read more »

A businessman holds a bolt of energy in both hands, indicating a share price rise in ASX energy companies
Dividend Investing

Does a 6.5% yield with relative stability sound good? Consider this ASX energy giant

This stock looks like a compelling choice for resilient income.

Read more »

Four young friends on a road trip smile and laugh as they sit on roof of their car.
Dividend Investing

Top ASX dividend shares to buy in April 2024

Winners are grinners!

Read more »

Woman customer and grocery shopping cart in supermarket store, retail outlet or mall shop. Female shopper pushing trolley in shelf aisle to buy discount groceries, sale goods and brand offers.
Dividend Investing

2 ASX dividend shares to beat inflation

Here are two ASX dividend shares that I think can help protect against inflation.

Read more »

A woman has a thoughtful look on her face as she studies a fan of Australian 20 dollar bills she is holding on one hand while he rest her other hand on her chin in thought.
Materials Shares

When will Pilbara Minerals resume paying dividends?

Pilbara hasn't paid out a dividend in 2024 yet.

Read more »

A strong female rock climber holds on to a precarious cliff face by her fingernails.
Energy Shares

Uh oh! Are Woodside shares facing a 'dividend cliff'?

Woodside shares currently trade on a 7.1% fully franked dividend yield.

Read more »