Ex-dividend Frequently Asked Questions

What does ex-dividend mean?
When a stock is classed as ex-dividend it means that if you were to buy shares you would not be entitled to the forthcoming dividend payment.

When is the latest time I can buy shares and still qualify for the dividend?
In order to qualify for the dividend you must have bought shares before the close of business on the day preceding the ex date.

How soon can I sell shares and still qualify for the dividend?
You can sell the shares as soon as the market opens on day they go ex. Usually they will already be marked down to reflect the ex-dividend status.

What if I have bought on an extended settlement, such as a T+20?
The settlement date is irrelevant; your ownership is based on the contract date.

What's the record date and why isn't it the same as the ex-dividend date?
Don't worry about the record date. It's an administrative date, usually one day after the ex-dividend date.

Are ex-dividend dates always Thursdays?
Mostly, but not always. There are occasionally circumstances where the ex-dividend day is different. These can occur when there is some other corporate action, such as a consolidation. They are basically there to catch you out and can be excellent trading opportunities, provided you're convinced you've got it right and the market has got it wrong!

What about tax?
Normally the dividends on UK shares are quoted and paid net of basic rate tax. If you pay tax at a higher rate you will have to pay the difference through your tax return.

What about CFD positions?
If you hold a CFD position you will not receive dividends as such. However, an adjustment will be made to your account on the ex-dividend date to reflect the share price movement due to the dividend payment. Typically you will receive a 100% credit on long positions and a 100% debit on short positions of the net dividend value. Terms may vary between CFD providers. Note that this is not classed as dividend income by the Inland Revenue but as a capital adjustment to your CFD position. This means you are potentially liable to capital gains tax on the dividend adjustment - something worth bearing in mind if you plan to scalp dividends through CFDs.

What about spread bet positions?
Adjustments are made in lieu of dividends in the same way as CFD positions. However, there are no tax issues to consider as spread bets are free of tax.

Are there any dividend adjustments if I trade the FTSE indices?
Yes, if you trade the FTSE indices there will normally be an adjustment made to your account to reflect the effect of companies which have gone ex-dividend. Terms may vary between providers.

6 Oct 2014