What is a dividend adjustment？
Dividends in Stock and Index CFDs When trading Contracts for Difference (CFDs) on stocks and indices, dividends play a key role in influencing positions.
CFDs allow traders to speculate on price movements without owning the underlying asset, but they still have exposure to dividends.
Stock CFDs: Traders who hold long (buy) positions on stock CFDs are entitled to dividend adjustments when the underlying stock issues dividends. These payments mirror the dividend paid by the actual stock, allowing CFD holders to benefit as though they owned the stock.
However, traders with short (sell) positions will incur a dividend adjustment as a deduction from their account.
Index CFDs: Index CFDs are composed of the performance of a group of stocks. When any of the constituent stocks of an index pays a dividend, the value of the index usually drops on the ex-dividend date. For traders holding long positions in index CFDs, a dividend adjustment may be credited to offset the drop. Conversely, short position holders will be debited the dividend amount.
As long as the client holds stock/indices at market open on a specific ex-dividend date, the dividend adjustment amount can be received or paid.
Dividend Adjustments Examples
1. Tesla Stock (TSLA.US) Example
Scenario 1:
Scenario 1: Buy Position
Buy Position
If you hold a Buy position on 50 TSLA.US (1 lot) on the ex-dividend date, you are entitled to receive a dividend adjustment.
Calculation:
Dividend per share × Contract size = $0.20 × 50 = $10.00
This $10.00 will be credited to your trading account.
Scenario 2:
Scenario 2: Short Position
Short Position
If you hold a sell position of 50 shares in TSLA.US on the ex-dividend date, you are responsible for paying the dividend adjustment.
Calculation:
Dividend per share × Contract size = $0.20 × 50 = $10.00
The $10.00 will be deducted from your trading account.
2. Nasdaq Index (NASUSD) Example
Scenario 1:
Scenario 1: Buy Position
Buy Position
Holding a Buy of 1 lot on NASUSD on the ex-dividend date means you will receive a dividend adjustment when a component stock of the index pays a dividend.
Calculation:
Dividend amount × Contract size = $3.50 × 5 = $17.50
This $17.50 will be credited to your account.
Scenario 2:
Scenario 2: Short Position
Short Position
If you hold a Sell position of 1 lot on NASUSD on the ex-dividend date, the $17.50 will be deducted from your account.
Calculation:
Dividend amount × Contract size = $3.50 × 5 = $17.50
This $17.50 will be deducted from your account.
Notice on Dividend Adjustment
Dividend adjustments are particularly important for traders and investors who trade stocks and CFDs. Dividend adjustments occur when a company pays dividends to shareholders, and these adjustments may affect the underlying stock or CFD positions. The ex-dividend date* is the date on which a stock is no longer eligible to receive dividends. Investors who purchase stocks after this date will no longer be eligible to receive the corresponding dividend distribution.
