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Danny

How do dividend exchange-traded funds work?

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Hello Danny,
Dividend ETFs aim at investing in several stocks that yield a high dividend. Dividend ETFs in a certain country my contain domestic stocks or the stocks that are used worldwide. Most indexes that come up with dividend ETFs hold stocks that yield a high dividend more than the market liquidity level.
Dividend ETFs typically follow a certain index, which means that they have passive management.
Stocks of the same class appear on several dividend stock-indexes. The stock indexes mimic companies that are in a similar field.
Dividend ETFs are largely diversified and produce a high turnover. Their fees are also lower compared to other forms of investments.
The dividend ETFs that an exchange-traded fund receives are put in an account that bears no interest until it is time to pay them out. When it is paying time, the dividends are equally distributed to all investors.
Dividend ETFs may, at times, be reinvested rather than pay them out in cash. It will not cost an investor more fees so that they can reinvest them. 
Though ETFs are seen as an excellent investment alternative compared to mutual funds, this does not exclude them from taxation.

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