No. of Recommendations: 6
Wall Street’s latest tax dodge doesn’t hide in the Cayman Islands or rely on complex derivatives. It’s engineered to turn a publicly traded fund into a tax-minimizing machine that hums quietly on autopilot.
While dividends have long been a defining feature of stock investing — a sign of corporate discipline and investor reward — Roundhill Investments plans to launch the S&P 500 No Dividend Target exchange-traded fund on July 10 with the ticker XDIV. Its ambition is simple but strategic: track the performance of the famous benchmark while dodging its payouts. The fund will sell holdings just before their dividend dates — steering income away from ETF shareholders and, in the process, away from their tax bills.
https://www.bloomberg.com/news/articles/2025-07-07...
No. of Recommendations: 3
I'm confused as to how this can work.
Buying and selling that often is going to cause a lot of transaction costs, not to mention taxable gains ?
I could see having a fund that avoids buying any dividend paying stocks but not doing it this way.
Rich
No. of Recommendations: 2
I'm confused as to how this can work.
Buying and selling that often is going to cause a lot of transaction costs, not to mention taxable gains ?
While most ETFs already sidestep capital gains by using a mechanism known as in-kind redemptions, XDIV’s strategy takes aim at a different category of tax exposure: ordinary income. The fund, which will charge a 0.0849% fee at the start, will invest in other S&P 500 ETFs, such as Vanguard’s VOO, but will exit positions just before ex-dividend dates. It will then rotate from one such index fund into another that isn’t about to pay a distribution.
That could appeal to clients who don’t reinvest payouts consistently — which can be a drag on performance — or high earners seeking to limit taxable income in brokerage accounts.
No. of Recommendations: 1
will invest in other S&P 500 ETFs, such as Vanguard’s VOO, but will exit positions just before ex-dividend dates. It will then rotate from one such index fund into another that isn’t about to pay a distribution.
VOO ex-dividend September 29, 2025
SPY ex-dividend September 19, 2025
So they duck the dividends, and don't have wash sales, but every time they rotate they get hit with Short Term capgains tax.
This sounds dumb. What am I not seeing?
No. of Recommendations: 9
So they duck the dividends, and don't have wash sales, but every time they rotate they get hit with Short Term capgains tax.
This sounds dumb. What am I not seeing?
The key point that you may be missing is that, because of the way ETFs exchange shares, they don't trigger taxable gains. Below is the explanation from Matt Levine's Money Stuff newsletter:
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No dividend ETF
Meanwhile, what if you want to own a broad index of stocks, but never get dividends? For the most part, owning stocks is pretty tax-efficient: If your stocks go up, you don’t have to pay taxes on the gains until you sell them, which could be a long time. But if the stocks pay dividends, those dividends are taxable income to you now. If you would prefer not to pay taxes, dividends are inefficient. And a lot of stocks pay dividends, so if you own a broad index, you’ll get some dividends.
You can’t really manufacture a solution yourself. A naive approach might be that, any time a company announces a dividend, you sell the stock a day before the ex-dividend date and buy it back the day after, so you don’t get the dividend.[3] But of course this is not what you want: You’re selling the stock! That triggers tax realization! The goal is to (1) never get dividends and (2) also never sell the stock.
An ETF can do that for you, because the most important ETF technology is never selling stocks. Stock ETFs normally do in-kind creations and redemptions: If you want to put money into a mutual fund, you give the fund money and it uses the money to buy stocks, but if you want to put money into an ETF, you instead buy shares of the ETF from a market maker, who in turn goes out and buys shares of the underlying stocks in the ETF and then delivers those stocks to the ETF in exchange for new shares of the ETF.[4] And vice versa when you withdraw money. The ETF never handles money; it never sells shares for cash; it only swaps its own shares for the assets it holds. And the tax rules allow ETFs not to recognize taxable gains on these transactions.
Many modern ETFs are set up to, essentially, never trade (or at least never sell appreciated stocks). If an ETF wants to sell Stock X and buy Stock Y, what it will actually do is find a market maker to (1) deliver ETF shares in exchange for a special redemption basket of Stock X and then (2) deliver Stock Y as a special creation basket in exchange for new ETF shares. The ETF’s buying and selling are both in-kind, paid for in ETF shares. This is called a “heartbeat,” and we discussed it in more detail a few years ago, when it was mildly controversial.
So if you want to own all the stocks but never get a taxable dividend, you really can’t do that on your own, but an ETF would be happy to do it for you. Bloomberg’s Vildana Hajric reports:
Roundhill Investments plans to launch the S&P 500 No Dividend Target exchange-traded fund on July 10 with the ticker XDIV. Its ambition is simple but strategic: track the performance of the famous benchmark while dodging its payouts. The fund will sell holdings just before their dividend dates — steering income away from ETF shareholders and, in the process, away from their tax bills. …
“The ability of ETFs to sidestep capital gains isn’t just a technical quirk anymore — it’s a core selling point, and issuers are leaning into this edge,” said Athanasios Psarofagis, ETF analyst at Bloomberg Intelligence.
Right, “if you buy our thing you don’t have to pay taxes” is actually a pretty good selling point.
