Why is the Vanguard Australian Shares Index ETF (VAS) tumbling on Monday?

The S&P/ASX 300 Index (ASX: XKO) and ASX shares are having a stellar start to the trading week so far this Monday. At the time of writing, the ASX 300 is up a healthy 0.78% at just under 7,190 points. So as an index fund covering the ASX 300, by all accounts, the Vanguard Australian Shares Index ETF (ASX: VAS) should be doing something similar.

Yet this ASX exchange-traded fund (ETF) is barely up today. Vanguard Australian Share ETF units closed at $89.78 each last Friday. But today, this ETF is only up by a seemingly paltry 0.29% at $90.04. Index funds like the Vanguard Australian Shares ETF are supposed to mirror the index they track. So this is a rather strange diversion.

Thankfully, this ETF isn’t broken, and neither is the share market. And in fact, investors should be grateful that Vanguard Australian Shares ETF units are in the green at all. This situation is occurring because it is ex-dividend day for the Vanguard Australian Shares ETF. Or more accurately, ex-distribution day.

Vanguard Australian Shares ETF doles out its latest dividend

Just like ASX shares, ETFs can pay out dividends too. These are known as distributions, and occur because an ETF that holds dividend-paying shares in its portfolio has to pass those dividends through to their investors.

In the Vanguard Australian Shares ETF’s case, it owns the 300 largest shares by market capitalisation on the share market. That’s everything from Westpac Banking Corp (ASX: WBC) and Rio Tinto Limited (ASX: RIO) to Xero Limited (ASX: XRO) and Lovisa Holdings Ltd (ASX: LOV).

So there are a lot of dividends to pass on here. As such, this ETF usually pays out quarterly dividend distributions. And the latest one is coming to investors soon.

Late last month, Vanguard announced that the Australian Shares ETF’s latest distribution would be paid on 20 April, with an ex-distribution date of 3 April.

Later, the provider confirmed that this distribution would be worth 57.6988 cents per unit. This is the lowest quarterly distribution that this ETF has paid out since July 2021. For context, last year’s corresponding quarterly payment was worth 199.59 cents per unit. The previous quarterly payment that was doled out in January this year was worth 74.97 cents per unit.

So as of today, new investors in the Vanguard Australian Shares ETF are not eligible for this upcoming dividend distribution. As such, this explains why the ETF isn’t matching the market’s gains and appears to be underperforming.

The post Why is the Vanguard Australian Shares Index ETF (VAS) tumbling on Monday? appeared first on The Motley Fool Australia.

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More reading

• Here are the ASX shares I was buying and selling in March
• Hoping to bag the next Vanguard Australian Shares Index ETF dividend? You’d better hurry
• No savings? Drip-feed $500 a month into ASX shares and aim to retire in comfort
• How much do I need to invest in ASX shares for $100 in weekly passive income?
• Does the fall in the Vanguard Australian Shares Index ETF share price make it a no-brainer buy?

Motley Fool contributor Sebastian Bowen has positions in Vanguard Australian Shares Index ETF. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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