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.
Gavin White, Head of Sales, City Index