One of the more popular, non-index-tracking exchange-traded funds (ETFs) on the ASX is the VanEck Morningstar Wide Moat ETF (ASX: MOAT).
MOAT is a US-focused, actively managed ETF. As we just touched on, it is not a blind index fund. Instead, it holds a relatively concentrated portfolio of American companies (currently around 60) that are all selected on their perceived possession of a wide economic 'moat'. This term, first used by legendary investor Warren Buffett, describes an intrinsic competitive advantage a company might possess over its competitors.
Just as a literal moat protected castles from invaders, an economic moat protects a company from competition. This protection can come in several forms. It could be a powerful brand that commands unswerving loyalty from customers. It could also be in producing goods or services at costs lower than competitors, or simply by providing a product that consumers find difficult to avoid using.
We can see this in action by looking at some of MOAT's current holdings. It's hard to deny the brand power of stocks like Walt Disney or Nike, for example. Nor the difficulty of avoiding the use of Microsoft or Boeing's products.
This approach has paid off for investors in the VanEck Wide Moat ETF. As of 31 May, MOAT units have returned an average of 14.59% per annum since this ETF's inception in June 2015. That includes unit price gains and dividend distributions.
Speaking of dividends, investors only found out this week what the latest payment from the VanEck Wide Moat ETF will be. And boy, it's a doozy.
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MOAT investors set for monster dividend pay day
As we covered yesterday, VanEck has just released the dividend distributions that owners of its ETFs can expect later this month. For the VanEck Wide Moat ETF, the amount investors will receive will come to $7.56 per unit.
As of the closing unit price on Monday (30 June) of $127, which was the last day to buy units before the ETF traded ex-distribution yesterday, this represents a yield of 5.95%. As MOAT holds no ASX shares, this dividend distribution will come unfranked.
Even so, that is unequivocally a fat payout from this ASX ETF. There are a couple of things to keep in mind here, though. Firstly, most of MOAT's holdings are not high-yielders themselves. As such, dividend distributions for this ASX ETF are mostly funded by portfolio rebalances, not dividend passthroughs. This can mean that MOAT's income can vary from year to year.
Secondly, unlike most ASX dividend shares, MOAT typically pays out just one dividend distribution every year. So, although this is a sizeable payout, it's likely the only income investors will see until July 2026.
This latest dividend distribution from the VanEck Wide Moat ETF will be paid out later this month, on 25 July.
