How Are Reinvestment Dividend Prices Calculated?

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    Dividend Amount

    • Mutual funds are required to pay out any earnings from the fund's portfolio in the form of dividends. When a mutual fund dividend is paid, the fund company declares the dividend amount as a dividend payment per share. For example, the Thornburg Limited Term Income Fund pays monthly dividends and the April 2011 dividend was $0.0339 per share An investor with 1,000 shares of this fund would earn $33.90 as the April dividend.

    Payment Date

    • For each dividend payment, the mutual fund company declares a payment date. On that day the dividend earned in the fund account will be paid and the proceeds used to buy more fund shares through reinvestment. Stock mutual funds typically pay a dividend every quarter and bond funds pay monthly dividends. The payment date is usually the same day of the month, often the 15th or last day. The example Thornburg Limited Term Income Fund paid the April 2011 dividend on April 30.

    Share Value

    • The share value used for dividend reinvestment is the net asset value -- NAV -- of the dividend payment date. Fund NAV's are calculated at the end of the day after the stock and bond markets close. A fund's NAV is calculated by dividing the total value of the fund's portfolio by the number of shares outstanding. After the NAV for the day is determined, an account's dividend amount will be applied to buy additional shares at the NAV.

    Tracking Dividend Reinvestment

    • Mutual fund companies do not make regular announcements of dividend payments like individual stocks. The payment dates and amounts of a fund's dividends can be located on the fund's web page. Since the fund NAV is calculated after market close, the NAV at which a dividend is reinvested will be the share price published the day following the dividend payment date. A mutual fund statement will show in detail the amount of dividend earned, the dividend payment date and the share price at which the dividend was reinvested.

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