If you own shares of an ETF, you may receive distributions in the form of dividends. There are two types of dividends issued to ETF investors: Qualified dividends: These dividends are taxed at the capital gains rate, which depends on your modified adjusted gross income and taxable income rate (0%, 15%, or 20%). These dividends are paid on stocks the ETF held for at least 60 days during the 121-day period beginning 60 days before the ex-dividend date. To receive the dividend, you must own shares of the dividend-paying ETF for at least 60 days during the 121-day period that begins 60 days before the ex-dividend date. That means investors who actively trade ETFs generally don't receive any dividends. Non-qualified dividends: These dividends are taxed at ordinary income tax rates because they are not designated as qualified. Dividends may be nonqualified if the ETF held the dividend-paying stock for fewer than the required 60 days.