A big selection of ProShares ETFs went ex-dividend today. The surprise in the announcement was that a short term capital gain was also declared for these ETFs and it many cases it was a whopper.
The chart below shows the dividend, the capital gain and the impact it had on the price of each ETF. I have chosen to use just a few ETFs as an illustration of the general situation though there was a total of 35 ETFs that went ex today (see the full list at the ProShares site).
You can see that the combination of the dividend and the short term capital gain had a large effect on the price of each ETF. Reductions in price ranged from 8% to 38%.
It's true that investors receive the income from this action. The problem is that the money is taxable and ProShares gave little warning that today was the ex-dividend date. They made the announcement last night and today it took effect. For those who were holding the ETFs for just a few days or as a quick overnight trade there was no opportunity to sell the ETFs beforehand - they are now stuck paying taxes on the capital gains.
Why are the distributions so big? As it says on the ProShares site, all ETFs are required by the IRS to distribute substantially all of their income and capital gains to shareholders at least annually.
So here is another aspect of the ProShares ETFs that investors need to be cautious about. As if these ETFs weren't volatile enough already.
The chart below shows the dividend, the capital gain and the impact it had on the price of each ETF. I have chosen to use just a few ETFs as an illustration of the general situation though there was a total of 35 ETFs that went ex today (see the full list at the ProShares site).
| Fund Name | Ticker | Dividend | S.T. Cap Gain | Closing price 12/22/2008 | ex-dividend price | percent change |
| UltraShort QQQ | QID | 0.005739 | 9.49928 | 68.82 | 59.31 | 14% |
| UltraShort Dow30 | DXD | 0.027612 | 16.0274 | 73.12 | 57.06 | 22% |
| UltraShort S&P500 | SDS | 0.028553 | 11.46188 | 87.44 | 75.95 | 13% |
| UltraShort MidCap400 | MZZ | 0.007783 | 23.84952 | 88.39 | 64.53 | 27% |
| UltraShort Russell2000 | TWM | 0.066508 | 25.00731 | 94.22 | 69.15 | 27% |
| UltraShort Basic Materials | SMN | 0.008847 | 26.57907 | 69.48 | 42.89 | 38% |
| UltraShort Consumer Services | SCC | 0.008631 | 33.91358 | 124.92 | 91.00 | 27% |
| UltraShort Real Estate | SRS | 0.023996 | 4.56656 | 61.03 | 56.44 | 8% |
You can see that the combination of the dividend and the short term capital gain had a large effect on the price of each ETF. Reductions in price ranged from 8% to 38%.
It's true that investors receive the income from this action. The problem is that the money is taxable and ProShares gave little warning that today was the ex-dividend date. They made the announcement last night and today it took effect. For those who were holding the ETFs for just a few days or as a quick overnight trade there was no opportunity to sell the ETFs beforehand - they are now stuck paying taxes on the capital gains.
Why are the distributions so big? As it says on the ProShares site, all ETFs are required by the IRS to distribute substantially all of their income and capital gains to shareholders at least annually.
So here is another aspect of the ProShares ETFs that investors need to be cautious about. As if these ETFs weren't volatile enough already.
Comments
You write that "ProShares gave little warning" ...
It is a joke : for me, there has not been warning at all !!!
A warning, as little it could be, should have been one day or two at least : shareholders as traders would have been able to decide, in true knowledge, the consequences of keeping or selling before the detachment, don't you think so !?
In fact, their decision without legal or human or social warning has provoked a real disaster for millions and millions of shareholders and traders : their kind of action is not of nature to give actually confidence.
Do you think a plaintiff's action is possible ?
Thanks for reading me.
Sal.
This is one of my worst trades ever and I actually bet the right direction! Go figure.
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