How are dividends calculated and distributed in CFD trading?

Table of content:

Cash Dividend
Stock Split or Reserve Stock Split
Dividends
Ex-dividend Date

When trading a single CFD stock, there will be corporate actions enforced by the related company. An example of this is a cash dividend. If this has been issued, then ATFX will adjust the client’s account accordingly. ATFX will take two actions:

Clients who hold BUY position(s) in a single stock CFD on the ex-dividend date will receive a positive cash amount which is equivalent to the dividend payout. (Deposits will be made into the client’s trading account according to their lot size and proportion of the dividend-paying underlying securities).

Clients who hold SELL position(s) in a single stock CFD on the ex-dividend date will receive a cash amount that is equivalent to the dividend payout. (Withdrawal will be made from the client’s trading account according to their lot size and proportion of the dividend-paying underlying securities.)

Adjustment Formula:

Number of stocks * Dividend per stock = Adjustment amount

(If the client account is denominated in USD, the adjustment amount will be converted to USD according to the spot exchange rate)

 

Cash Dividend

For example, if Apple Inc. (AAPL) announces a $0.01 USD cash dividend to its stockholders. On the ex-dividend date, Apple Inc.’s stock price would reflect the corporate action and would drop $0.01 in price. ATFX will make cash adjustments to clients who are holding open positions at Apple Inc. CFD.

If an individual client of ATFX is holding 10,000 stocks of BUY positions, the cash adjustment will be calculated using the following equation:

10,000 stock CFDs x 0.01USD = 100USD cash dividend

(Note: If a client is holding 10,000 stocks of SELL positions, ATFX will deduct 100 USD from the client’s account.)

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Stock Split or Reserve Stock Split

If a company announces a stock split or reserve stock split, the company’s stock price will be subject to significant change.

Reserve Stock Split: CFD price will increase

Stock Split: CFD price will decrease

Open positions of the Apple Inc CFD. Should this not just say ‘clients who are holding open positions of the relevant CFD?

However, a single stock CFD will also be affected by corporate action, which may occur when the listed company initiates any business changes Like a stock split, reserve stock split, or dividend payout, etc., and as a result, may affect the company’s financial position, its stock price performance, and the interests of stockholders.

 

Dividends

A listed company will announce its earnings reports semi-annually (or quarterly). Dividends are subject to approval by a company’s board of directors, and It’s a distribution of a company’s earnings to a specified class of its stockholders. Generally, dividends will be issued in the form of cash dividends or stock dividends.

 

Ex-dividend Date

An ex-dividend is a stock trading term that specifies when a declared dividend is owned by the buyer as opposed to the seller. If an individual buys a stock before the ex-dividend day, he or she is then entitled to receive a dividend. If an individual buys a stock on or after the ex-dividend date, the buyer no longer has the right to receive the dividend. Investing in an undervalued stock not only has the potential to increase in value, but it also allows investors to reap the benefits of receiving dividends.

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