What Mechanism Is Used to Distribute Dividends or Interest Payments to Holders of a Fungible Tokenized Security?

The smart contract of the fungible tokenized security is programmed to handle the distribution. The contract calculates the payment amount based on the total number of tokens and the per-token dividend/interest.

It then automatically executes a transfer of the payment token (often a stablecoin) to all token holders' addresses based on their current balance at a predefined snapshot block height.