I think it is per a %.
If you pay 500$ worth of one of them, you own say 1 share of a 1$ stock and 2 shares of a .50$ stock, etc, up and down all the costs some with more shares and some with less. Then when those companies pay out their dividends you get that payout of those number of shares.
If each pay you 0.01 per a share, then you make .01$ and .02$.
That would seem like the more logical way to me.
If what you are saying is true, then it makes the case for timing the market much more attractive. Are you sure dividends are paid by the share and not by a percentage of stock value? It would then make more sense to buy the cheap index funds to get more shares for dividends
I thnk you're missing something here YoungStache. When a stock issues a dividend, the stock price drops by the amount of the dividend.
So if you have 100 shares of VTSAX which are $50 each before the dividend, and then they issue a dividend of $1, then you now have 100 shares of VTSAX which are $49 each. You also have $100 of cash. You still have the same amount of money as before: 49*$100 + $100 = $5000.
I fully understand the value drops, but that was not his question?
I think he wants to know WHERE, like not where does the value come from, but where does the number come from.... the dividend comes from? It is a % of each asset allocation from the fund, or is it based on total $ of each asset allocation.
At least that is how i took his question...
edit: as the other person said, is it per a share bases, or a percent :D
edit: wow i re-read that and it sounds so confusing....
I agree it wasn't his question, but there was a bigger issue I wanted to address.
Some people are under the impression that the dividends are a free lunch. That is, one could buy a stock before the dividend, get the dividend, and then sell all the shares for easy profit. I mean if the dividend is declared before it's issued, then this would be an easy profit making scheme right?
Of course, we know it's not because the share price drops by the dividend amount. But not everyone knows this important part.
And as for YoungStache's actual question on how the dividend amount is calculated, I have some idea but I'm not confident enough to provide an answer. Frankly, I don't really care how the dividend amount is calculated.