Dividends are treated differently with CFDs than shares.
For shares there are a number of key dates to understand. Once the dividend has been declared by the company, usually in their annual or half yearly report, the share is said to be cum dividend (which is translated to with dividend). Anyone purchasing the share while the share is cum dividend is entitled to receive the dividend.
The share then goes ex dividend (which is translated to excluding dividend) and anyone purchasing the share on the ex dividend date or after is not entitled to receive the dividend. The ex dividend date is the day the share price usually drops by the dividend amount or close to it.
The record date is 3 days after the ex dividend date which allows for the share transactions that occurred on or before the ex dividend date to be recorded. This is due to the ASX rules that require settlement within 3 days of the purchase, known as T+3. On the record date the share holder must own the share and have ownership recorded with the share registry to receive the dividend.
And finally there is the payment date which is the date the dividend is actually paid to the investors. This could be anywhere from weeks to months after the record date depending on the company’s dividend policy.
Dividends with CFDs are far more streamlined with the ex dividend date being the important date. Any CFD trader entering a long position on a CFD before the ex dividend date will receive the dividend in cash on the ex dividend date. Buying a CFD on the ex dividend date will not entitle you to receive the dividend.
On the other side of the equation any CFD trader entering a short position on a CFD before the ex dividend date will have the cash amount of the dividend deducted from his or her account on the ex dividend date.
Franking credits are tax credits that a shareholder receives when they receive a dividend payment. This tax credit is available in recognition that the company has already paid tax on the dividend before it is paid to the shareholder. Franking credits are not available to CFD traders.
