What are dividends on indices?

When shares that are part of a CFD index reach their ex-dividend date, the index price is adjusted to reflect its payment

What are they?

Working Trader

Dividends are the part of the corporate profits that a company distributes among its shareholders.

Along with capital gains obtained by the appreciation in value of the index, dividends are usually the primary source of return for passive investors.

Stock indices reflect the evolution in value of the underlying shares that constitute it.

In general, it is made up of a selection of companies that are listed on the same stock exchange, or that have something in common like sector indices.

When shares that are part of a CFD index reach their ex-dividend date, the index price is adjusted to reflect its payment.

¿How does that work at Darwinex?

When a company that is part of an index pays dividends to its shareholders, liquidity providers of that CFD index will pay or charge to Darwinex the proportional portion corresponding to the volume opened by its clients in that CFD.

The following day, Darwinex will make the corresponding cash adjustment in its traders' accounts, paying the amount to those who are long and charging the amount of the dividend to those who are short.

This process is fully automatic, and you can consult all the dividend payments on your MetaTrader platform at any time.

The particular case is in the German DAX (GDAXI in Darwinex)

Unlike most stock indexes, the DAX reinvests the dividends in the index itself, so this will be reflected in its price.

Therefore, traders operating the DAX will not pay or receive any dividend.

However, for tax purposes related to German regulations, when a company pays dividends in Germany, 7% of that amount is withheld.

To resolve this fiscal effect, these two cases can occur:

  1. A trader shorting the DAX. If you are shorting the DAX when there is a dividend payment from one of its companies, you will receive 7% of such dividend.
  2. A trader going long in the DAX. If you are long in the DAX, and a dividend is paid out, you will have to pay 7% of that dividend.

As a general rule, DAX companies usually pay dividends in May.

Do you want to know more?

Although the final result in your trading account won't be too affected by dividends, as a trader, you are 100% responsible for gathering such information.

The Internet is an inexhaustible source of information regarding dividend payments.

By way of guidance only, we show you some websites that you can consult: