We refer to payments from a fund as distributions not dividends. Here is why:

Dividends are payments made by companies to their shareholders. They are paid out of the earnings, or profits, of the company. Shareholders receive the dividends as a cash payment. Companies are not obligated to pay dividends, but large companies tend to have stable and predictable dividend policies as one way to attract investors. Small companies that are growing quickly, on the other hand, typically do not pay dividends because they reinvest the profits to continue to build the company.

A fund pools money from investors to buy assets, such as shares of a number of companies. When the shares that a fund holds pay dividends, the fund distributes the dividends to the investors of the fund as a distribution.

Both dividends and distributions represent cash payments, but a difference lies in their source as from a company or a fund. In a similar way, bonds pays coupons - a fixed rate of interest.

Some funds, like Kernel’s, may give you the option for the distributions to be paid in cash or used to automatically purchase more units of the fund.

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