View the estimated indices dividend drop points* for week commencing 21 October 2019.
|Cash index / Day||Monday||Tuesday||Wednesday||Thursday||Friday|
|Hong Kong 50||3.82|
|South Africa 40||3.38|
|US NDAQ 100||0.78||0.55|
|US SPX 500||0.04||0.25||0.21||0.26|
A dividend is a distribution of a portion of a company's earnings, decided by the board of directors, to shareholders. Dividends are normally issued as cash payments or in the form of shares, if you own the underlying share.
When a stock goes ex-dividend, the value of that stock effectively falls by the dividend amount. This means if you hold a CFD (or spread betting in the UK) position in a company where you don't own the underlying share, and that company announces a dividend, your account will be credited or debited on the day the stock goes ex-dividend.
If you were long (holding a buy position), you would have been disadvantaged by the drop in the market caused by the pay out of the dividend, so we would credit your account with the dividend amount, less any applicable dividend withholding taxes. If you were short, you would benefit from the drop in the price, so the equivalent amount would be deducted. So, overall, you don't lose or gain anything from the adjustment. There are no withholding taxes on short positions.
We will adjust your guaranteed stop-loss level by the same amount of points as the dividend adjustment (maintaining the same level of risk), however, regular stop-loss, take profit and pending orders will not be amended by us.
Shares dividend example
Let's say you hold a long position of 3,000 Vodafone share CFDs and Vodafone announces a 15p dividend. In this case, £450 would be credited to your CFD account.
15p x 3,000 = £450
Note: If you held a short position going into the ex-dividend date then your account would be debited £450.
The dividend will appear as a 'Price Adjustment' in your account history within the platform.
How are dividends dealt with for indices?
When a stock goes ex-dividend, ignoring other market forces, the value of that stock effectively falls by the dividend amount. In most cases this will cause the index value to drop too, as the value of the index is based on the value of the stocks within it. The amount that the index drops is dependent on the weighting of the stock within the index. This means if you hold a position in an index and a constituent of that index announces a dividend, your account will be credited or debited on the day the stock goes ex-dividend.
Following on from the above example, a similar cash adjustment would also be applied to your account if you held a position in the UK 100 index, where Vodafone is a constituent. We would convert the 15p dividend into points to calculate the amount to be deducted or added in relation to the relevant index CFD (or spread bet in the UK).
Note: There are no price adjustments on forward indices, or our Germany 30 and Norway 25 cash indices.
Dividend adjustments on long positions are credited to your account, less any applicable withholding taxes. Withholding tax is a levy deducted from dividends in most underlying markets. The deduction varies depending on the underlying market, but it's often reduced to 15% where a treaty between the UK and the relevant market exists. The withholding tax deduction doesn't apply to short positions.
If you have any queries please contact our Client Management team who will be happy to help.
*These drop points are provided for information purposes only and not intended to provide trading or investment advice. We reserve the right to change any of the information contained herein at any time, in case of error. CMC Markets UK Plc and/or CMC Spreadbet plc shall not be responsible for any loss, either directly or indirectly, arising from any action of any kind taken and that is based on the information contained herein.
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