As exchange-traded funds are made up of a number of stocks (or bonds), they offer full dividend payouts in the same way that a single share would. Most do this on a quarterly basis by collecting dividends paid by the underlying shares during this 3-month holding period and subsequently making payouts to shareholders on a pro-rata basis. Dividend payments can either be paid in the form of cash or additional shares of the ETF.
ETFs can be set up as either income or accumulation. Income ETFs make sure that dividend income is paid out to investors as cash, whereas accumulation ETFs do not offer a dividend. Instead, their income is reinvested, which can cause the price of the ETF to increase.
Most of the time but not always, dividend-yielding ETFs consist of stocks rather than bonds, although there are some exceptions, such as the iShares Broad USD Investment Grade Corporate Bond ETF, which offers a reasonable dividend yield of 2.54%.
