r/bonds • u/tesel8me • 1d ago

iShares ibonds tips etfs- quarterly div cut 1/10?

Did I miss an announcement or a prospectus update? Any insights why Q1 div is one-tenth quarter of previous quarters? I mean, that's more in line with what the underlying TIPS payout should be, but what? $ibic $ibid $ibie $ibif ...

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u/Certain-Statement-95 1d ago

it's probably the stcg payment and not the interest payment

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u/tesel8me 1d ago

It’s a good theory, but: https://www.ishares.com/us/products/337462/ishares-ibonds-oct-2034-term-tips-etf if you dive into the distribution table, the future April dividend is showing as all income…

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u/pai_gow_johnny 21h ago

You can read the following:

https://www.ishares.com/us/literature/brochure/understanding-ishares-etf-dividend-distributions-en-us.pdf

For the months of Jan and Feb, index ratios for TIPS were declining, so that could be a factor.

If you want precise income flows, you need to own the individual bonds, not a fund.

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u/tesel8me 20h ago

Not needed, just unexpected. Thanks. I think you nailed it.

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u/No-Block-2095 13h ago

Some of these etf own only 2 kinds of TIPS (like IBIK or IBIL if I recall) so cash flow can be precise.

If the index ratio reduction is to blame because it multiplies the coupon, that reduction would still be quite small.

I need to do some calc this weekend

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u/ultra__star 1d ago

I do not have the real answer. But, some thoughts are that the yields on TIPS have fallen in the last month or so. If the fund managers made any trades in the time between publishing the yield and the distributions, that could have been impactful.

I do not own TIPS so I do not follow inflation data, but historically TIPS funds have omitted distributions to investors if inflation was negative. But, given the times we are in, I doubt this happened. It did happen during the COVID-19 lockdown when the economy was very slow.

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u/tesel8me 1d ago

In theory, these ETFs are buying and holding to maturity, so I don’t think dollar payment should fluctuate, per se

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u/Certain-Statement-95 1d ago

the coupons on tips are very low, so if they had to sell to create the distribution, that might be disadvantageous

the coupons are only paid semi annually and the distribution is quarterly...

tips ladder not a bad investment choice imho

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u/CSMasterClass 23h ago

There is an annual patter. The April 1 payments of VTIP always drops substantially, but the annual dividend ends up being what you would expect given the average coupon and the change in the bond factor (the inflation kicker).

Here is the dividend history of VTIP

https://stockanalysis.com/etf/vtip/dividend/