Exchange-traded funds (ETFs) pay out the full dividend that comes with the stocks held within the funds. To do this, most ETFs pay out dividends quarterly by holding all of the dividends paid by underlying stocks during the quarter and then paying them to shareholders on a pro-rata basis.

Do ETFs pay fully franked dividends?

Franked dividends

LICs can pay investors fully franked dividends derived from its investee companies and additional franking credits from any tax paid from its company profit. An ETF can only pay investors dividends from the underlying investment companies (flow-through dividends).

Do ETFs get franking credits?

Franking credits

When an ETF receives dividends that include franking credits those dividends and the attached franking credits flow through to investors directly via the quarterly distributions.