How do dividend payments affect my CFD position?

A cash dividend is the portion of profit a company chooses to pay out to its shareholders – usually expressed as a percentage. To be eligible, you would need to hold your position into the market open of the ex-date.

CFD accounts are derivative accounts used to speculate on price movements and don’t receive cash dividends. Instead, ‘dividend adjustments’ are used to mitigate for the price movements of dividend payments and dividends are adjusted on the ex-date for CFD accounts. This ensures no profit nor loss is made from these price movements, as they’re scheduled public events.

If you hold a long position, your profit/loss (P/L) would decrease if a dividend is issued, as funds are leaving the company, thus decreasing the company’s value. However, we would credit your account with the amount your P/L decreased to ensure there is no material impact and to bring your account up to fair value.

If you hold a short position, your P/L would increase if a dividend is issued, as funds are being distributed out of the company to shareholders. However, we would debit your account with the amount your P/L increased to ensure there is no material impact and to bring your account down to fair value.

Please note that dividends are adjusted on the ex-date or post ex-date. Once we receive the allocation, it will be adjusted accordingly on the clients’ accounts.

Please note: This information is intended as a generic example, and subject to change at any point. It may not apply in every scenario.