Dividends in ETFs represent a portion of the profits distributed to shareholders. There are two main approaches to handling these dividends:
Distributes: Dividends are paid out to shareholders in cash, typically monthly, quarterly, or annually. This option provides immediate income but may have tax implications.
Reinvests: Instead of cash payouts, dividends are reinvested in purchasing additional ETF shares. This approach promotes long-term investment growth through compound interest but does not provide immediate income to shareholders.