FXAIX does pay dividends, but they are reinvested automatically unless you change your account settings

Fidelity NASDAQ-100 Index Fund (FXAIX) holds 100 large-cap stocks, most of which pay dividends. When those companies pay out, FXAIX collects the money and passes it to you. The fund itself does not create dividends — it distributes what its holdings generate. By default, your dividends are reinvested into more shares of FXAIX rather than paid to you in cash.

The dividend yield on FXAIX changes with the market. Because the fund tracks the NASDAQ-100, which includes many technology companies that historically paid little or no dividend, FXAIX's yield is typically lower than the overall stock market. You can see the current yield on Fidelity's website or your account statement.

If you want cash instead of automatic reinvestment, you can change this in your Fidelity account settings. The choice between reinvestment and cash depends on your goals: reinvestment compounds your returns over time, while cash gives you money to spend or move elsewhere.

Key Takeaways

  • FXAIX distributes dividends from its 100 holdings, typically once per quarter, with the amount varying based on what those companies pay.
  • Dividends are reinvested automatically by default, meaning you receive additional shares rather than a cash payment.
  • You can change your account settings to receive dividends as cash instead, though this is a one-time choice per account.
  • FXAIX's dividend yield is usually lower than the overall market because the NASDAQ-100 includes many tech stocks that pay little or nothing.

How FXAIX dividend distributions work

FXAIX holds 100 stocks. When those companies pay dividends to shareholders, the fund collects those payments and distributes them to you proportionally based on how many shares you own. This happens roughly four times per year, though the exact timing and amount vary.

The fund does not decide how much to pay — it simply passes through what it receives. If Apple, Microsoft, or Nvidia (all NASDAQ-100 holdings) increase their dividends, FXAIX's distributions increase. If they cut dividends, FXAIX's distributions fall. You can track these payments on your Fidelity statement under "Distributions" or "Dividends Received."

Automatic reinvestment versus cash dividends

When you buy FXAIX through Fidelity, the default setting is dividend reinvestment. This means when a dividend is paid, Fidelity uses that money to buy additional shares of FXAIX at the current price. You do not receive a check or cash deposit — your share count simply increases.

Reinvestment is powerful over long periods because you earn returns on your dividends, not just your original investment. Over 20 or 30 years, this compounding effect can meaningfully increase your total return.

If you prefer cash, log into your Fidelity account, find FXAIX, and change the dividend reinvestment setting to "Cash." After that change, dividends will be deposited into your Fidelity cash account instead. You can then spend the money, move it to another investment, or leave it sitting in cash.

Why FXAIX's dividend yield is lower than the S&P 500

The NASDAQ-100 is heavily weighted toward technology and growth companies. Many of these firms — including Amazon, Tesla, and Nvidia — historically reinvest profits into the business rather than pay dividends. This is a deliberate strategy: growth companies often believe they can generate better returns by expanding than by paying shareholders cash.

By contrast, the S&P 500 includes more mature, established companies in sectors like utilities, energy, and consumer staples that tend to pay higher dividends. This is why an S&P 500 index fund like FSKAX typically has a higher dividend yield than FXAIX.

Lower dividend yield does not mean FXAIX is a worse investment — it simply means the fund's returns come more from stock price appreciation than from dividend income. Your total return depends on both sources.

Tax implications of FXAIX dividends

In a taxable brokerage account, you owe taxes on FXAIX dividends whether you reinvest them or take them as cash. Fidelity will send you a 1099 form at tax time showing the total dividends you received. The tax rate depends on whether the dividends are may have access to (taxed at capital gains rates, usually lower) or nonqualified (taxed as ordinary income).

Most dividends from U.S. stocks held in FXAIX are may have access to, which means they receive preferential tax treatment. However, you still owe tax in the year the dividend is paid, regardless of whether you reinvest it.

In a retirement account like a traditional IRA or Roth IRA, dividends are not taxed when paid. This is one reason retirement accounts are popular for index fund investing — you can reinvest dividends without worrying about annual tax bills.

Checking your FXAIX dividend history

You can see what FXAIX has paid in dividends by logging into your Fidelity account and viewing your transaction history, or by visiting Fidelity's fund page for FXAIX. The page shows the dividend payment dates and amounts for the past several years.

Keep in mind that past dividend payments do not may provide future ones. If the companies in the NASDAQ-100 cut their dividends during a recession, FXAIX's distributions will fall. Conversely, if they increase dividends, your distributions will rise.

Frequently Asked Questions

How often does FXAIX pay dividends?

FXAIX distributes dividends roughly four times per year, typically in March, June, September, and December. The exact dates depend on when the underlying companies pay their dividends. Fidelity's website shows the specific payment dates for each distribution.

Can I receive FXAIX dividends as cash instead of reinvesting?

Yes. Log into your Fidelity account, select FXAIX, and change the dividend reinvestment setting from "Reinvest" to "Cash." After that, dividends will be deposited into your Fidelity cash account instead of buying more shares. You can change this setting back anytime.

Is FXAIX a good choice if I want dividend income?

FXAIX is better suited for growth than income because the NASDAQ-100 includes many tech stocks that pay little or no dividend. If you prioritize dividend income, an S&P 500 fund or a dividend-focused fund may be a better fit. FXAIX works well if you want long-term growth with modest dividend reinvestment.

Do I owe taxes on FXAIX dividends if I reinvest them?

Yes, in a taxable account. You owe taxes on dividends in the year they are paid, whether you reinvest them or take them as cash. In a retirement account like an IRA, dividends are not taxed when paid. This is one advantage of holding index funds in tax-advantaged accounts.