When companies declare a dividend, they choose the amount per share, the date the stock will go ex-dividend, and the date payment will be made to shareholders of record. If you hold that stock directly in your account, you know when to expect payment. The process is relatively straight forward.

Investors got spoiled by the mutual fund industry. The default option for mutual funds is to have dividends automatically reinvested. Whatever day your mutual fund goes ex-dividend, the total amount of the dividend is used to purchase additional shares at the end of the day. The time lag between ex-dividend and payment received and reinvested is reduced to a minimum.

With the advent of ETFs, the structure for pooled accounts changed. The process of gathering up the dividend payments from all the stocks in the portfolio remains the same, but the payout and reinvestment process is more like a stock. Most major ETF sponsors now pay their dividends within a week of the ex-dividend date. Vanguard, iShares, and Schwab make their ETF dividend payments just four business days after the ex-dividend date. I would consider these to be examples of “industry best practice”.

Other ETF sponsors are not quite as efficient. Some, like ProShares take an extra day, and PowerShares doubles the industry best practice by taking eight business days. Then there are the SPDRS from State Street. State Street has improved recently, and this month the majority of their ETFs are on the same schedule as PowerShares. The delay from the June 18 ex-dividend date to the June 30 payment date is the quickest I ever recall for the Sector SPDRS.

However, the SPDR S&P 500 (SPY), the largest US-listed ETF, remains a special case. This month SPY went ex-dividend $0.53128 per share on June 18, 2010. With about 719 million shares outstanding, this amounts to a total payout of nearly $382 million dollars, not exactly chump-change.

Industry best practice would have gotten that money to its rightful owners, the shareholders, last Thursday, June 24. Industry second-tier practice would get that money delivered no later than this Wednesday, June 30. So, when can SPY shareholders expect to receive their payments? The answer may shock you, because it will be six weeks after the ex-dividend date. Payment will be made July 30, the last business day of next month.

SPY’s chief competitor, iShares S&P 500 (IVV), follows industry best practice, taking just four business days to make payments on dividends. IVV’s shareholders should see their dividend on Tuesday, June 29. Meanwhile, SPY’s shareholders are being forced to make what appears to be a 30-day loan of $382 million to State Street.

Bottom line: IVV and SPY are not the same. IVV has a slight expense ratio advantage, a commission-free trading advantage at Fidelity, and a huge dividend payment delay advantage. Many software programs that calculate total return assume dividends are reinvested on the ex-dividend date. This can lead to performance figures that are not achievable in reality. In the case of SPY, the reinvestment date could actually be six weeks later, under very different market conditions.

Disclosure covering writer, editor, and publisher: No positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.