When An ETF Distribution Isn’t A Dividend: Explaining Capital Gains

Income investing has become particularly popular in recent years, as near-zero interest rates have left many starved for attractive yields. As such, many investors turned to equity ETFs paying out high dividends to find a stable source of income. But looking through past distributions and current yield metrics is not always the most accurate method for evaluating an ETF’s yield, as there are several nuances to these products that need to be taken into account, including capital gains [see also 12 High-Yielding Commodities For 2012]. Capital Gains Though the exchange-traded structure helps these products to avoid incur capital gains far less frequently than mutual funds, a number of ETFs incur capital gains through out the year, which will ultimately lead to high distributions to investors. The shareholders of the ETF, like you, will be responsible for paying the taxes on these capital gains, the same as you would if you had sold [...] Click here to read the original article on ETFdb.com. Related Posts: The Truth About Alternative Weighting Methodologies (And ETFs) ETFs: The $10 Billion Club Tax Efficiency Report Card Ten New Year’s Resolutions For ETF Investors November ETF Stats: Small Step Back