Do you get dividends on share CFDs?
Verdict
- Not the dividend itself: if you hold a long share CFD over the ex-dividend date, the provider credits a cash adjustment linked to the dividend, and if you're short, it debits one. Pepperstone, our pick for share CFDs in Australia, sets out its method in its PDS.
- You don't receive franking credits, because you never own the shares.
- The adjustment offsets the share price's drop on the ex-date, so it keeps your position's value level rather than adding a return.
- A share CFD is therefore a poor tool for collecting dividends: you pay commission and nightly financing for an adjustment that only cancels out the price fall.
Share prices typically fall by roughly the dividend amount when a stock goes ex-dividend. Without an adjustment, CFD holders would lose that drop and shorts would gain it unfairly. The cash adjustment exists to keep both sides whole.
How dividends work on Pepperstone share CFDs
Pepperstone offers 1,162 share CFDs, including 200 on the ASX and 600+ in the US, under ASIC licence AFSL 414530. Holding one over an ex-dividend date brings a cash adjustment instead of a payment from the company. The exact calculation, including how foreign withholding tax is treated, is set out in Pepperstone's Product Disclosure Statement, so read it before holding through a large or special dividend. Trading costs are 0.07% per side on ASX shares and $0.02 per share on US shares.
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Why the adjustment cancels out
Take a share trading at A$40 that pays a A$1 dividend. On the ex-date it might open near A$39. A long CFD loses A$1 a share on price and receives about A$1 a share in adjustment; a short gains A$1 on price and pays about A$1. Other market moves that day come on top, but the dividend itself leaves both sides roughly level.
| Position | Price effect | Dividend adjustment | Net |
|---|---|---|---|
| Long 500 | −A$500 | +A$500 | About A$0 |
| Short 500 | +A$500 | −A$500 | About A$0 |
What a CFD holder misses compared with a shareholder
- Franking credits: these go to shareholders on the register, not to CFD holders.
- Dividend reinvestment plans: you can't elect to receive new shares.
- Voting rights and shareholder communications.
- Any guarantee that the adjustment equals the gross dividend on foreign shares, where withholding tax may reduce it.
When dividends should change your plan
- Shorting a high-yield stock over its ex-date means paying the dividend, which can turn a small winning trade into a loss.
- Buying a CFD just before the ex-date to collect the adjustment doesn't work, because the price drop cancels it out.
- Holding a long share CFD for months to collect several dividends means paying financing every night, which can exceed what the adjustments bring.
- If income is the goal, owning the shares through a stockbroker, with franking credits, is the better route.
Sources
Product terms and costs as published by Pepperstone.
When is the dividend adjustment applied?
Providers generally apply it around the ex-dividend date, when the share price adjusts. Check your provider's PDS for the exact timing.
Can I use share CFDs to capture dividends?
No. The price drop on the ex-date offsets the adjustment, and you pay commission and financing on top.
How is a dividend adjustment taxed?
Our data doesn't cover tax. Ask a registered tax agent how adjustments on CFDs are treated in your situation.
Share CFDs are complex, leveraged products with a high risk of losing money quickly, and they don't give you ownership of the shares or their franking credits. Read the PDS and TMD. This is general information, not tax or investment advice.