What Are Dividends?
A dividend is a portion of a company's profits paid to its shareholders as a reward for holding the company's stock. Dividends are typically declared by a company's board of directors and paid on a scheduled basis - quarterly, semi-annually, or annually - either as cash payments or additional shares.
What Are Dividend Adjustments?
A dividend adjustment is a cash credit or debit applied to your trading account when you hold an open CFD position in a stock or index instrument on its ex-dividend date. When a company distributes a dividend to its shareholders, the share price typically drops by an amount approximately equal to the dividend value on the ex-dividend date - since the dividend payment is being removed from the company's equity value. Because CFD traders do not own the underlying shares, they are not entitled to receive dividends directly. Instead, MH Markets Financial Services applies a dividend adjustment to open positions to reflect this price movement - ensuring that traders are neither unfairly advantaged nor disadvantaged solely as a result of the dividend event. Dividend adjustments apply to both individual stock CFDs and index CFDs, as indices are composed of dividend-paying constituent stocks. The adjustment is applied automatically to your account on the ex-dividend date.
Example:
A company in the UK 100 (100GBP) declares a dividend of $0.50 per share. On the ex-dividend date, the index opens approximately 0.50 points lower to reflect the payout. If you hold a long position, your account receives a credit of $0.50 per lot - offsetting the price drop. If you hold a short position, a debit of $0.50 per lot is applied - preventing an artificial gain from the same price movement.
