DeltaStock - Global Forex and CFD Broker

Open a Live Account
Open a FREE Demo Account
Инвестиционен посредник в България с най-висок рейтинг за 2017 г.
Инвестиционен посредник в България с най-висок рейтинг за 2017 г.
Lesson

Dividend adjustment payments in CFD Trading

Dividend adjustment payments are payments similar to dividends, which are charged or paid to clients holding open positions in CFDs on shares, indices and/or ETFs.

Similar to a direct investment in the underlying instruments, their CFDs are subject to corporate events, including ones related to the payment of dividends. The client who owns CFDs does not own the underlying asset itself, which means that during corporate events related to dividend payments, the client will receive a dividend adjustments payment. It will be derived from the dividend itself, but unlike the dividend, it will not be related to owning the underlying asset.

Whether a dividend will be distributed to shareholders is usually decided by the general shareholder meeting of the issuer company, and in the case of ETFs, the management companies. When it comes to indices, in most cases the availability and distribution of dividends to their holders follows the availability and distribution of dividends of the shares included in the index. There are exceptions, however, where dividends are not paid, and the respective corporate events are reflected in the price of the index, in accordance with its calculation formula.

The dividend adjustment payment is set by the so called „ex-date”, or the first day after the date on which, if the client is a shareholder in the company, they will be entitled to receive a dividend.

With the arrival of that date, shares start trading without the right to a dividend, which is reflected in their price.

The ex-dates for shares are announced by the share issuer companies and are usually included in the decisions of the general shareholder meetings.

The ex-dates for ETFs are announced by their respective management companies.

The ex-dates for indices follow the ex-dates for the shares comprising the index.

Please be advised that prices and dividend adjustment payments displayed below are for reference purposes only and do not reflect the current market situation.

Share and ETF CFDs:

If you hold an open position in CFDs on shares and/or ETFs at the start of the business day (00:00 h EET), which coincides with the ex-date of the respective underlying asset, the dividend adjustment payment on an open long position will be paid to your account, and respectively, on a short position, it will be withheld from the account.

Examples:

- By the ex-date 15.02.2018, a company has announced a gross dividend in the amount of 1.36 EUR per share. If you hold a long position in CFDs on shares of that company, then for each CFD you own by the ex-date, you will receive a dividend adjustment payment in the amount of 1.36 EUR.

- By the ex-date 15.02.2018, a company has announced a gross dividend in the amount of 1.36 EUR per share. If you hold a short position in CFDs on shares of that company, then for each CFD you own by the ex-date, a dividend adjustment payment in the amount of 1.36 EUR will be withheld from your account.

Note: There are cases where Deltastock is required, in compliance with the national legislation of the issuer company or the management company, to withhold a tax on the dividend adjustment payment for CFDs on shares or ETFs*. In such cases, the dividend adjustment payment for an open long position will be credited to your account, after the tax has been withheld. When a dividend adjustment payment is deducted from your account, no such tax will be withheld.

Examples:

- By the ex-date 15.02.2018, a US company has announced a gross dividend in the amount of 0.590USD per share. If you hold a long position in CFDs on those shares and if we assume that the applicable dividend tax in the USA is 10% for your country, then for each share CFD you own by the ex-date, after the appropriate tax has been withheld, you will receive a dividend adjustment payment in the amount of 0.531 USD (0.590 USD /dividend/– 0.059 USD /tax/).

- By the ex-date 15.02.2018, a US company has announced a gross dividend in the amount of 0.590USD per share. If you hold a short position in CFDs on those shares, then for each company share you own by the ex-date, a dividend adjustment payment in the amount of 0.590 USD will be withheld from your account.

Index CFDs:

If by the ex-date you hold a long position in an index CFD, a dividend adjustment payment will be paid to your account, which will be calculated based on the proportional weight of that share in the underlying index.

If by the ex-date you hold a short position in an index CFD, a dividend adjustment payment will be withheld from your account, which will be calculated based on the proportional weight of that share in the underlying index.

Please note that the weight of individual components (companies) within each index is calculated using a different method. Therefore, distribution of dividends is calculated differently for each index.

Example:

- By the ex-date 15.02.2018, a US company has announced a gross dividend in the amount of 0.590USD per share. The company is a part of a certain index, and by the ex-date its weight in the index is5.45%.

The closing price of the company shares on 15.02.2018 is 92.68 USD.

The closing price of the index on 15.02.2018 is 13,172.76 USD.

Then the dividend adjustment payment for 1 CFD on that index would be:

Dividend adjustment payment = 0.590 USD × 13,172.76 USD × 5.45% = 4.57 USD
92.68 USD

If you hold a long position in CFDs on that index by the ex-date, you will receive a dividend adjustment payment of 4.57 USD. And, respectively, if you hold a short position, a dividend adjustment payment of 4.57 USD will be withheld from your account.

Deltastock reserves the right to change the amount and the way of payment and deduction of dividend adjustment payments, in case of amendments in the applicable legislation governing dividend distribution by issuers, including with a view of taking into account the applicable taxes levied on dividends in the issuer’s or another jurisdiction.

*W8-BEN Form

Please be advised that in accordance with US tax legislation, Deltastock is required to withhold a 30% tax on any dividend adjustment payments on US Share and/or ETF CFDs. If you are a tax resident of a country which has a treaty in place with the USA, you may apply for a reduced withholding rate.
A list of all countries the USA has tax treaties with as well as their applicable tax rates can be found here.


Note: The information displayed on this page is for educational purposes only and is not a personal recommendation or investment advice. Any quotes of financial instruments in the examples are for reference purposes only and do not reflect the current market situation.