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 EXPERT PANEL |
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Ask the Expert
CFDs and dividends
Gavin White, Head of Sales, City Index
How do I get paid dividends from holding a share CFD? Can you give me an example of how it works?
Share CFDs offer investors all the commercial benefits of trading in physical shares (except for voting rights and franking credits), while avoiding many of the costs and obligations associated with physically trading the shares.
With regard to dividends, most CFD providers will credit you a percentage of the announced cash dividend if you are holding a long share CFD position when the company declares an ex-dividend date.
Others will credit 100% of the cash dividend paid by the company to qualifying client’s accounts on the next business day after the ex-dividend date of the stock. Conversely, if you hold an open sold CFD, your account will be debited an amount equal to 100% of the cash dividend on the first business day after the ex-dividend date.
These adjustments are posted to client trading accounts and appear as separate entries on client statements – making things much simpler when it comes time to prepare tax returns.
It is important for individuals who are considering using CFDs as a method of investing in shares to determine the dividend policy of each CFD provider. Not all providers are the same and this can affect the investment outcomes.
Look into whether you can participate in dividend payments, and also other corporate actions such as rights issues, bonus issues, subdivisions, consolidations, reclassifications and other similar events.
More articles from this edition of CompareShares:
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Advisor Lounge: Reducing tax on investment properties with DIY super
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Commodities: Gold still shining brightly
Expert Panel: Receiving dividends with CFDs
Companies: Woolworths denies greenwashing claim
Our panel of experts are available to answer any questions you have on products and strategies, or simply to explain a particular term. The team consists of experts on CFDs, Forex, Broking, Options, Warrants, Futures and ETFs.If you've got a question, you can post it at: Your 2 Cents, in the 'Ask the Expert' section.
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