What is a dividend-paying ETF?

As with a dividend stock, a dividend-paying ETF structures shareholder payments around an ex-dividend date or ex-date, a record date and a payment date. The ex-date is a deadline. If you want to receive a dividend for an ETF you don't yet own, you must buy it before the ex-date.

Do ETFs pay dividends?

If you own shares of an exchange-traded fund (ETF), you may receive distributions in the form of dividends. These may be paid monthly or at some other interval, depending on the ETF. It's important to know that not all dividends are treated the same from a tax perspective. There are 2 basic types of dividends issued to investors of ETFs:

Should you invest in dividend-paying ETFs?

Dividend-paying ETFs can be a great tool for those looking to increase cash flow and diversify their investments. They offer a simple solution to getting exposure to a specific investing niche — in this case, stocks that pay a regular dividend. You can use those dividends to pad your income as many retirees do.