Every week we provide insights into popular assets and hot questions, so you can easily learn more about the investment market in bite‑sized pieces.
In this Markets in Focus we take a closer look at Dividends. But how much do you actually know about dividends?
Take a look below or see a short video here: https://www.youtube.com/shorts/lSUaw0skhJo
What are dividends
A dividend is a distribution of a portion of a company’s earnings to its shareholders. It is often issued as a cash payment to the holder of the underlying share.
In the case of CFD trading, even though you do not own the underlying share, you may still receive a dividend adjustment if you hold a long position on the share‑CFD before the ex‑dividend date.
What you should know about dividends
Dividends are sometimes overlooked by CFD traders — yet there are several key facts that any trader should be aware of, because they impact how stocks (and CFDs on stocks) behave around certain dates.
- Yes, CFD share positions can pay dividends: If you hold a long position in a share CFD at the market open on the ex‑dividend date, you will receive a dividend adjustment. Conversely, if you hold a short position, you may have a dividend adjustment debited from your account.
- The share price typically falls by roughly the dividend amount on the ex‑dividend date: Because the company’s value is reduced by the dividend payout.
- Index CFDs and many other derivative instruments may not pay dividends directly: For index CFDs you may get a dividend adjustment rather than the actual dividend, because you don’t own the constituent shares.
- Timing matters: To qualify for a dividend adjustment on a share CFD, you must hold the position before the ex‑dividend date (and keep it open at the opening of the market on that date).
What dividends can tell you about a company’s health
- Companies pay dividends out of their profits or retained earnings — a regular dividend can be a signal of stable cash‑flow and mature business.
- Dividend payout ratio (dividends divided by earnings) is a key metric — companies using a high proportion of earnings for dividends may have less room for reinvestment.
- For traders it’s useful to know when a company is going ex‑dividend, because the price behaviour can follow a pattern: often a small rally just before, and a drop on the ex‑dividend date.
Do all US stocks pay dividends?
No - not all stocks pay dividends. Some growth‑oriented companies reinvest earnings rather than pay them out. For example, a company like Amazon historically did not pay dividends, while a long‑standing dividend payer like McDonald’s Corporation pays dividends consistently.
https://www.tradingview.com/markets/stocks-usa/market-movers-high-dividend/
We wish you a successful trading week - whether your strategy involves dividend‑income or price‑movement only.
Until next week!
