What a good question! And it’s good news not bad…
The EIGA share price (but really it’s a unit price) is made up of two things:
- the value of the underlying shares held by the fund; plus
- dividend income that has been received by the fund from those shares and which has not been yet been paid out via distributions
EIGA’s policy is to pay out an equal distribution to our investors every month – you know we love monthly income – based on how much dividend income the fund would be expected to earn over a normal year (in most cases this is around 7%, including franking credits). Any dividends and other income above this level are held back and paid out at the end of the year.
However, in FY2019, the fund generated an unusually large amount of dividend income. This was because the fear that Labor would win the election and pare pack people’s ability to claim franking credit refunds, led many companies to lift their dividends or undertake off-market buy-backs.
As a result, at year-end, there was a large amount of surplus income – 29 cents per unit – sitting inside the fund and being reflected in the unit price.
When EIGA (or any other fund) pays out a distribution, the unit price falls by the amount of the distribution. On the 27th of June, EIGA went “ex-distribution”, meaning that this income was “officially” paid out to unitholders (it will hit your bank account on the 15th of July). So on the one hand investors received a payment of 29 cents per unit, but at the same time, the unit price decreased by this amount.
Come 1 July this process starts again – Income and capital starts accumulating in the EIGA unit price and monthly income gets paid.The unit/share price will rise and fall according to movements in the underlying portfolio of shares and the income generated by those shares.
Here’s an example.:
One investor holds 1000 units in EIGA that they bought for $4 per unit/share ($4000 invested initially). They have been receiving monthly income distributions of 1.67 cents per unit which is a monthly income of $16.70. Since investing, the unit price/share price of EIGA has fluctuated with the market and dropped just before 30 June as EIGA went ex-dividend. on the 15th of July the investor will receive their 30 June distribution. It will be unusually large at 29. cents per unit, or $290 in total.
If you still have some questions, we always are happy to hear from our investors. Please contact us on [email protected].