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.
How does dividend payment affect my CFD account?
CFD accounts are derivative accounts used to predict price movements and don’t receive cash dividends. Instead, ‘dividend adjustments’ are used to mitigate 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 dropped by to ensure there is no material impact and 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 by to ensure there is no material impact and bring your account down to fair value.
How does dividend payment affect my share trading account?
As soon as we receive dividend payments for any of the shares you own, we will credit your share trading account with the amount you are eligible for. This usually would occur on, or around, the dividend payment date. It may take a few days after the dividend payment date for us to credit your account, as the dividends are first paid to our broker which need to be cleared then transferred to IG.
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