Dividends are an economic term for regular payments to a company's shareholders. Their frequency may vary, but as a rule, payments are made on a quarterly, semi-annual or annual basis. The Board of Directors calculates them on the day called the registration date. The amount due is transferred on the next day, called the payment date. A preliminary date is determined a couple of days before the registration date. The list of shareholders entitled to dividends is made up on this day. According to the rules, only those investors who have invested in shares before the preliminary announcement date are eligible for the dividends.
It is not the case with contracts for difference (or CFD XETRA): dividends are paid differently, but the point is the same. The holders of contracts for difference get paid a Dividend Adjustment. The ex-dividend date is similar to the preliminary date. On this day, clients’ open positions are checked. When clients have an open long position (buy), the dividend adjustment is credited to their trading account. If they have an open short position (sell), the amount is debited on the account.
Dividend Adjustment applied to long positions is accrued on the ex-date and settled during T + 2 (after 2 business days); Dividend Adjustment applied to short positions is settled during Т + 0.
Dividend adjustment is calculated by the following formula:
Shares*Dividend Payout=Dividend Adjustment
Example:
On May 13, 2016 Bayerische Motoren Werke AG (#BMW) Board of Directors pays a quarterly dividend of €3.2 per share.
Let us say that as of ex-dividend day (May 13, 2016) you have an opened long position (BUY) in the volume of 3 lots in #BMW (Bayerische Motoren Werke AG). Now you can calculate the amount of dividend adjustment by the above-described formula:
1 standard lot = 1 share, which means you bought 3*1=3 shares.
3 (number of shares) * 3.2 (dividend amount) = €9.6 (dividend adjustment)
Thus, your payment will amount to €9.6.
Respectively, dividend adjustment is calculated by the same formula if as of ex-dividend date you have an open short (SELL) position in the above instrument.
In this case €9.6 will be written off.
