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Dividends
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Dividends

Understand how dividends affect your trading positions and maximize your potential returns

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Understanding Dividends in CFD Trading

Dividends are payments made by corporations to their shareholders as a distribution of profits. When trading CFDs on dividend-paying stocks or indices, it's important to understand how dividends affect your positions.

At EBC Financial Group, we apply dividend adjustments to your account based on your open positions in CFD stocks and indices on the ex-dividend date:

Dividend Adjustments

  • Long Positions (Buy): If you hold a long position in a stock or index at the market close before the ex-dividend date, you will receive a dividend adjustment to your account.
  • Short Positions (Sell): If you hold a short position in a stock or index at the market close before the ex-dividend date, a dividend adjustment will be deducted from your account.

Example of Dividend Adjustments

Let's say you hold a long position of 100 shares in Company XYZ, which announces a dividend of $0.50 per share:

Long Position Example

Position: 100 shares long

Dividend per share: $0.50

Adjustment calculation: 100 shares × $0.50 = $50.00

Result: $50.00 credit to your account

Short Position Example

Position: 100 shares short

Dividend per share: $0.50

Adjustment calculation: 100 shares × $0.50 = $50.00

Result: $50.00 debit from your account

Important Points About Dividends

  • Dividend adjustments are processed automatically and will appear in your account history.
  • The ex-dividend date is the date on which the stock begins trading without the value of the next dividend payment.
  • Stock prices typically drop by approximately the amount of the dividend on the ex-dividend date.
  • Dividend adjustments may be subject to withholding tax depending on the regulations of the company's country of incorporation.

Dividend Calendar

Stay informed about upcoming dividend distributions with our comprehensive dividend calendar. This tool helps you plan your trading strategy around important ex-dividend dates.

Access our dividend calendar through the MT4/MT5 platforms or contact your account manager for personalized dividend information.

Dividend Trading Strategies

Many traders develop specific strategies around dividend dates. Here are some common approaches:

Dividend Capture

This strategy involves buying shares shortly before the ex-dividend date to receive the dividend, and then selling afterward. When trading CFDs, you can capture the dividend adjustment by holding a long position through the ex-dividend date.

Ex-Dividend Price Adjustments

Since stock prices typically fall by approximately the amount of the dividend on the ex-dividend date, some traders take short positions just before this date to capitalize on the expected price drop.

Dividend Yield Investing

This long-term strategy focuses on companies with strong, consistent dividend payments. When applied to CFD trading, it involves maintaining long positions in high-dividend yield stocks or indices to benefit from both potential price appreciation and regular dividend adjustments.

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Have questions about dividends? Visit our FAQ or contact us.