I've been buying municipal bonds funds for the federal tax exempt interest payments. On January 25-28, 2025, I bought some T Rowe Price municipal bond funds, PRIHX, PRFHX and PRTAX. Since this was before the ex-dividend date of January 31, I expected to get the full month's interest payment. That's what happens with stocks purchased before the ex-dividend date.
When I checked on Friday, January 30, 2026, the date of the ex-dividend, I only received 1/10 or less of the expected dividend. I called the brokerages, and they gave a couple of explanations/recommendations. First, wait until until Monday. Sometimes, it takes an overnight adjustment to correct the issue. Second, one brokerage said several people had the issue and it was being corrected. I also called T Rowe Price. They said that the dividend had not been posted on their website yet and therefore, I should wait.
On Monday, February 2, 2025, there was no change and I call Schwab back for more assistance. The agent put me on hold and consulted with the mutual fund specialists. After a few minute, he explained that the bond mutual funds paid dividends on a accrual basis, i.e. a prorated amount based on how long I owned it. Hmm... I didn't know that. I called T Rowe Price and confirmed.
After further investigation, I learned many bond funds use the accrual method to pay monthly dividends.
Disclosure: I was not compensated by T Rowe Price nor Schwab for writing this post.
This is not financial nor mutual fund investing advice. Please consult a professional advisor.
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