Own the VanEck Wide Moat ETF? Get ready for a monster ASX dividend

MOAT investors are in for a treat next month.

| More on:
A person is weighed down by a huge stack of coins, they have received a big dividend payout.

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

The VanEck Morningstar Wide Moat ETF (ASX: MOAT) is an exchange-traded fund (ETF) that has a strong following on the ASX.

This actively managed ETF has turned plenty of heads in recent years with its Warren Buffett-like investing style and impressive performance metrics.

Unlike many ASX ETFs though, the Wide Moat ETF only pays out one dividend distribution a year. As such, it's normally a much-watched event when we find out exactly how much MOAT investors are set to bag for the year just gone.

Well, today is the day for the 2024 financial year. We've just learned how much investors in the Wide Moat ETF are set to get paid. And boy, it's a doozy this year.

So according to an ASX filing released this morning before market open, MOAT investors are set to enjoy an FY2024 payout of $9.73 for every MOAT unit owned.

At the current MOAT unit price of $124.42, this equates to a yield worth a whopping 7.82%. That's an improvement on the $8.15 investors enjoyed this time last year. As well as a huge increase over the 98.11 cents per unit that was doled out back in 2022.

As the VanEck Wide Moat ETF holds no ASX shares, this dividend distribution won't come with any franking credits attached.

So how is this ETF managing to pay out such a massive dividend? Particularly when most of its underlying holdings don't have particularly large dividend yields?

How can the MOAT ETF afford this monster ASX dividend?

Well, an ETF can fund a dividend in two ways. The first is by passing on any dividend income it receives from its underlying holdings. Part of this $9.73 per share would be made up of this passed-through income.

But the other way is by banking profits resulting from the ETF's periodic rebalancings.

The MOAT ETF works by allocating each of its holdings an equal weight in its portfolio. If a share grows in value and, as a result, occupies a larger position in MOAT's portfolio, the ETF sells off the excess value and banks the profit. It's clear that this has occurred frequently over MOAT's FY 2024, resulting in the monstrous dividend its investors are set to enjoy.

But if anyone who doesn't already own MOAT units wishes to receive this supersized dividend distribution, they'd better hurry. The VanEck Wide Moat ETF is scheduled to trade ex-dividend next Monday, 1 July.

That means today is the last day you can buy MOAT units with the rights to this dividend attached. From Monday onwards, buying MOAT units will probably be cheaper, as new investors will miss out on this monster payout.

For eligible investors, dividend payday will then roll around on 23 July next month.

Motley Fool contributor Sebastian Bowen has positions in VanEck Morningstar Wide Moat 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 recommended VanEck Morningstar Wide Moat ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on ETFs

Australian dollar notes in businessman pocket suit, symbolising ex dividend day.

Own the Vanguard Australian Shares Index ETF (VAS)? Here's how much you'll get paid today

Today's VAS paycheque might disappoint some investors.

Read more »

Cubes placed on a Notebook with the letters "ETF" which stands for "Exchange traded funds".

Why I'd still call the FANG+ ETF a buy

The US tech giants have been great performers.

Read more »

The letters ETF with a man pointing at it.

Buy and hold these ASX ETFs until 2030

Looking for long term options? Check out these picks.

Read more »

Contented looking man leans back in his chair at his desk and smiles.

Should Aussies choose Vanguard Australian Shares Index ETF (VAS) or a term deposit for passive income?

Both investment options come with positives and negatives.

Read more »

Hand holding Australian dollar (AUD) bills, symbolising ex dividend day. Passive income.

Where to invest $5,000 into ASX ETFs in July

Could these funds be a good place to invest your money?

Read more »

A woman sits at her desk thinking. She is surrounded by projections of world maps on various screens with data appearing below them.

These top ASX global shares ETFs delivered stunning returns of 50% to 70% last year

We reveal the 6 best-performing ASX ETFs providing Aussie investors with international market exposure.

Read more »

Five people are leaping in the shallows of the beach water as sunset shines gold on them.

Which Australian shares ASX ETFs have dished out the best returns over 3 years?

We reveal the top 5 performers over the past three financial years.

Read more »

excited young female in business attire and wearing glasses is holding up $100 notes in both hands.

Own iShares S&P 500 ETF (IVV) units? It's payday for you!

It’s another rewarding day to be a IVV ETF unitholder.

Read more »