Many investors love owning companies that pay dividends and for good reason: It’s money that can be used to either buy more units within their mutual fund or to supplement their income stream.
All dividend income flows into a mutual fund and then it’s a matter of whether that mutual fund distributes those dividends.
When it comes to stocks, the payout process is straight forward. You buy the stock and the company pays out a certain percentage of its earnings to shareholders. You can then either take the cheque or reinvest those dollars.
But what happens to dividends paid into a mutual fund? The process is somewhat different – mutual fund payouts are called distributions for one. We spoke to Nathalie Godbout, Vice-President Consulting and Support IG Investments, for more dividend details.