Clicky

Corporate Actions

Posted By Robert On Friday, April 24th, 2015 With 0 Comments

Another major advantage of CFDs is the ability to participate in corporate actions. It can vary from traditional share trading in many ways;

  • Most providers will pay a cash equivalent of the dividend on ex date rather than a wait up to three months for traditional share traders.
  • You will not receive franking credits but may be liable to pay them when you are short.
  • When you are short a CFD it must be remembered you will pay the cash equivalent on ex date.
  • Most providers will let you participate in share splits and rights issues as long as the position has been held over the required period. As an example for a dividend you have to hold the position going into the ex date to be eligible to recei9ve payment.
  • Some corporate actions are unavailable such as limited share purchase plans.

A good example of this is referred to as dividend surfing or stripping. The benefit of CFD trading is you only have to outlay a small margin to access a much larger position. Corporate actions are paid on the full position you have as a CFD trader. Using the example below the CFD trader for the same position as a share trader only outlays  $175 instead of the full $3,500 and therefore the Return On Investment (ROI) is 200% instead of 10%.

Dividends and CFDs

Share Button

Recent Posts

Pepperstone

June 9, 2020, Comments Off on Pepperstone

HYCM

February 11, 2020, Comments Off on HYCM

CoreSpreads

June 10, 2019, Comments Off on CoreSpreads