Lessons

Equivalent dividend payments for CFD trading

An Equity Dividend is a payment similar to a dividend that is accrued or withheld to a CFD of CFDs on equity, indices and / or ETFs.Like a direct investment in these underlying instruments and CFDs, they are subject to corporate events, including those relating to dividend payments. A client holding a CFD does not … Continue reading Equivalent dividend payments for CFD trading
single-image
img-ads

An Equity Dividend is a payment similar to a dividend that is accrued or withheld to a CFD of CFDs on equity, indices and / or ETFs.
Like a direct investment in these underlying instruments and CFDs, they are subject to corporate events, including those relating to dividend payments. A client holding a CFD does not own the underlying itself, so it will receive a dividend adjustment payment for corporate dividend payments. It will be a derivative of the dividend itself but, unlike it, will not be linked to the ownership of the underlying assets.
Whether a shareholder dividend will be distributed usually resolves the general meetings of the shareholders of the issuer companies and, in the case of the exchange traded funds, the management companies. In most cases, the presence and distribution of dividends to index holders follows the distribution and distribution of dividends of the shares included in the index. There are exceptions, however, when dividends are not distributed, and the corporate events in question are reflected in the price of the index according to its calculation formula.
The equal pay dividend is set to the so-called “ex-date” – this is the date that, if the client is a shareholder in a company, will be entitled to a dividend.
As soon as that date occurs, the shares are traded unlicensed and this fact affects their price.
The “ex-date” dates for the shares are announced by the companies issuing the shares and are usually included in the decisions of the General Shareholders’ Meetings.
The “ex-date” dates for ETFs are announced by the management companies of these funds.
The “ex-date” dates for the indices follow the “ex-date” dates of the shares included in their composition.
Keep in mind that prices and flat-rate dividends shown below are only indicative and do not reflect the current market situation.
CFDs on Equities and ETFs:
If you have an open position on CFDs on shares and / or ETFs at the beginning of a business day (00:00 AM), which coincides with the “ex-date” of the underlying, the equaling dividend payment, at an open long position, will be charged / add to your account, and, respectively, open short position will be deducted / deducted from it.
Examples:
– As of “ex-date” February 15, 2018, a company has announced a gross dividend per share of EUR 1.36. If you hold a long position in CFDs on the shares of this company, then for each of them that you own at the “ex-date” you will receive the equaling dividend payment of € 1.36.
– As of “ex-date” February 15, 2018, a company has announced a gross dividend of EUR 1.36 per share. If you have a short position in CFDs on shares of this company, then for each of them that you own to the “ex-date” you will be deducted the equalization dividend payment of € 1.36.
Important: There is a case where Deltastock is required, under the laws of the Issuing company or the management company, to withhold tax on the payment of the equalization dividend payment for CFDs on shares or ETFs *. Then the equal dividend payment, in the open long position, will be charged / added to your trading account once the tax is deducted. When an equalizing dividend payment is deducted from your account, no taxes are payable on the same.
Examples:
– As of “ex-date” February 15, 2018, a US company has announced a gross dividend per share of $ 0.590. If you have a long CFD position on a company’s shares and if we assume that the US dividend tax is 10% for your country, then for each CFD on the shares of the company that you own at the “ex-date”, after deduction of the due you will receive a flat-rate dividend payment of $ 0.531 ($ 0.590 / dividend / – $ 0.059 / tax).
– As of “ex-date” February 15, 2018, a US company has announced a gross dividend per share of $ 0.590. If you have a short position in CFDs on the shares of that company, then for each of you holding an “ex-date” you will be deducted a flat-rate dividend payment of $ 0.590.
CFDs on indices:
If you have a long CFD position on an ex-date, you will be charged the equalization dividend payment with the proportional weight of the applicable dividend in the base index.
If you have a short position in CFD on an “ex-date”, you will be deducted the equalization dividend payment with the proportional weight of the applicable dividend in the base index.
Keep in mind that each index has its own methodology for calculating the weight of the components (companies) in its composition, so the distribution of dividends is calculated differently for each index.

Towards “ex-date” February 15, 2018, a US company has announced a gross dividend per share of $ 0.590. The company participates in the calculation of an index and on 15.02.2018 its weight in the value of the index is 5.45%. The closing price as of 15.02.2018 of the company is 92.68 USD. Closing price as of 15.02.2018 of the index – 13 172.76 USD. In this case, the equaling dividend payment for 1 CFD on this index would be 4.57 USD.
If a client has a long CFD position on an index in which that company participates, and assuming that the US dividend tax is 10%, then for each CFD on the index it owns as of 15.02.2018, after deduction of the tax due he will receive the equaling dividend payment of $ 4,133 ($ 4.57 / dividend / – $ 0.457 / tax).
If a client has a short position on the CFD on this index, then for each CFD on the index he owns as of 15 February 2018, he will be charged with the equaling dividend payment of $ 4.57.

img-ads

Leave a Comment

Your email address will not be published.

You may also like