Quick research on the issue of ETF dividend reinvestment:
"Surprisingly the answer is no. I thought too, but then I checked my account and so no dividend reinvestment. I thought it would automatically reinvest but I checked my account and it appears like the answer is no. I'm going to call my broker to double-check as well, but I also found this on The Motley Fool.com which confirms that ETFs do not have dividend reinvestment plans similar to mutual funds :o(
Dividend differences: Most mutual fund investors take advantage of their fund's automatic dividend reinvestment feature. That saves them the hassle of deciding what to do with the cash that comes their way periodically. If and when the mutual fund pays out a cash dividend, your cut of the dough is automatically reinvested in shares, or partial shares of the fund.
With dividend-paying ETFs, that moolah winds up in your brokerage account instead, just like the dividend on a regular stock. If you want to reinvest that cash, you have to make another purchase -- and you'll get smacked with your usual trading fee unless your broker allows you to reinvest dividends for no extra cost. Many do.