Dividends: what % do you get?

alphahunter

Member
64 0
Hi,

A few companies have paid large special dividends recently (Heritage Oil: special dividend:100p/share price:450p; Polo resources:3p/7p etc,...). More to come include International Power, Dignity,...

Which spread-betting firm do you use and what % proportion of dividend do you get if you are long? Thanks.

IG Index : 85%
 

alphahunter

Member
64 0
Well guys, I know - dividends is not the most exciting topic compared to FX trading leveraged 20x. But I don't do FX, only long-short small to large cap stocks.

And a few cos are returning large amount cash to shareholders by way of special dividends; not all spreadbetting companies will credit the full amount of the dividend if you are long, although they would charge you the full amount if you are short. Obvioulsy that does not apply to CFDs and direct holdings (you get the full amount but then you pay income tax on it).

That does not matter that much for regular (read small) dividends. But in the case of Heritage Oil for instance, I knew that IG Index would retain 15p out of the 100p special dividend for each 450p-worth share, equivalent to 3% instant loss of value even before trading cost/spread. That's why I did not go for it (independently of the investment case proper).

Yet it can be a viable short-term strategy to go for special dividends (not the purpose of that thread) provided they are credited in full. Hence my question.

Someone mentionned to me that Interactive Broker credits 100% of the dividend for long spreadbetters; IG Index does 85%. How much do you get with your spreadbetting company?

Thanks.
 

alphahunter

Member
64 0
OK, not much of an answer after more than 130 viewings in a week. I'll post the query in the UK equity forum and deem this thread closed. Thanks.
 

SanMiguel

Experienced member
1,135 25
Hi,

A few companies have paid large special dividends recently (Heritage Oil: special dividend:100p/share price:450p; Polo resources:3p/7p etc,...). More to come include International Power, Dignity,...

Which spread-betting firm do you use and what % proportion of dividend do you get if you are long? Thanks.

IG Index: 85%
You get the same dividend whether you are SBing, CFDing - it's based on the # shares holding even if leveraged.
Where did you get the info from? Large dividend payouts like this mean stop losses need to be adjusted.
 

alphahunter

Member
64 0
"You get the same dividend whether you are..."

No you don't I'm afraid. IG Index may be credited with the (full) dividend (if they hedged their position) but they don't pass it on fully. This is a commercial decision, vaguely "justified" in an interview by one of their reps that should you hold the stock directly, you would be subjected to the witholding tax. Which is mixing apples and oranges.
I'm a client of IG Index, that's my source and am fairly satisfied with them.

PS: I don't and haven't used stop losses for 3 years bar two occasions. It's a waste of money IMO.




"Where did you get the info from?"
 

SanMiguel

Experienced member
1,135 25
"You get the same dividend whether you are..."

No you don't I'm afraid. IG Index may be credited with the (full) dividend (if they hedged their position) but they don't pass it on fully. This is a commercial decision, vaguely "justified" in an interview by one of their reps that should you hold the stock directly, you would be subjected to the witholding tax. Which is mixing apples and oranges.
I'm a client of IG Index, that's my source and am fairly satisfied with them.

PS: I don't and haven't used stop losses for 3 years bar two occasions. It's a waste of money IMO.




"Where did you get the info from?"
That's a rather broad statement about stop losses.
What do you mean they don't pass it on fully? If there's a dividend, they pay it out to your account regardless of their holding in the market. Perhaps it's in the small print that they don't HAVE to but fact is that they do.
 

alphahunter

Member
64 0
Hi San Miguel.


1) You're right it's a broad statement that needs to be adjusted for personal aversion for risk and take into account specific circumstances (e.g. stock subject to formal take-over talks that may not materialise,...). But let's leave that issue aside as it is an entirely different subject.

2) If there is a dividend, of course they will credit it to MY account regardless of their holdings and that dividend will be credited to THEIR account if they hedged their position. We agree here.

3) BUT they will not credit it to my account to its full amount. They take a cut. It's a commercial decision.
 

SanMiguel

Experienced member
1,135 25
Hi San Miguel.


1) You're right it's a broad statement that needs to be adjusted for personal aversion for risk and take into account specific circumstances (e.g. stock subject to formal take-over talks that may not materialise,...). But let's leave that issue aside as it is an entirely different subject.

2) If there is a dividend, of course they will credit it to MY account regardless of their holdings and that dividend will be credited to THEIR account if they hedged their position. We agree here.

3) BUT they will not credit it to my account to its full amount. They take a cut. It's a commercial decision.
I contacted their CS and they said you get the full amount. I believe they adjust it at source for the "tax" rate that is applied to all dividends. What cut are they taking from your dividends?
 

alphahunter

Member
64 0
Thanks for taking the time and calling them; if I am not mistaken, we arrive to the same conclusion: there is an adjustement on long positions (on shorts, they debit the full amount).

The cut - or adjustment is 15% with IG index .

I was wondering whether that rate was different with other spreadbetting companies.

Thanks
 

SanMiguel

Experienced member
1,135 25
Thanks for taking the time and calling them; if I am not mistaken, we arrive to the same conclusion: there is an adjustement on long positions (on shorts, they debit the full amount).

The cut - or adjustment is 15% with IG index .

I was wondering whether that rate was different with other spreadbetting companies.

Thanks
I'm not sure where you are getting your info. from but this is from their site:
If going long - receive 90% (the NET figure) of the dividend on Wednesday morning if you have held the position on the close of market on Tuesday (on ex-div day)

If going short - pay the dividend on Wednesday morning if you have held the position at close of market on Tuesday (on the ex-div day)

This is exactly the same as it works if you held the actual underlying asset, the 10% is tax at source as for real dividends. They don't take any cut themselves.
 

SanMiguel

Experienced member
1,135 25
This may help you guys:

http://www.independentinvestor.co.uk/spread-betting/spread-betting-dividend.html

I think Capital Spreads pay 80% of the dividend if long, and you pay 100% if short.
This is what they say about it, sounds like a complete load of tosh :)

A: The reason that we do this is because of the tax situation. If a client owns a share that is going to have a big dividend (on which he will have to pay 25 to 40% tax) it would be much better for him to sell the shares before ex-div date and take a spread bet out as he would then get 100% of the dividend in a price reduction and then on the day after the ex-div trade back into the shares. We reduce this to 80%. When you take into account spread/dealing costs...etc the 20% reduction in the dividend removes this temptation (!). This might (we believe) make Capital Spreads compliant in attempts at tax avoidance which would at the very least (if it became very prevalent) bring the eye of the taxman very firmly in our direction.

In the real world you have somewhere between 25 and 37 per cent tax on dividends. We believe that the 20% charge plus attendant dealing costs make it less likely that Capital Spreads can be seen to be aiding tax avoidance.
 

alphahunter

Member
64 0
Jaydee,
That answers my question about Capital Spread. Thanks.
So so far we've got IG Index :85%. Capital Spread:80%

SanMiguel,
I'm not sure where you got 90% for IG Index, their website says rather vaguely "the dividend adjustment will be credited to your account, minus any tax payable", which turns up to be 85% on UK shares as told over the phone.
Otherwise, I agree with you about, a load of tosh. As an intermediary, they could reclaim the withholding tax but I suppose that's not worth the trouble and most of their clients (us) aren't too bothered either it seems. Except when a large dividened is paid.
 

Jaydee

Established member
556 107
ETX credits 90% when long and debits 90% when short. That's the best (and fairest) I've found so far.
 

mandamus

Newbie
1 0
This is quite an old thread and some of the figures above may have changed, but for info I just thought I would add in the current ones for GFT.

On short trades you pay 100% in all cases
On long trades you get 100% on indices (amount index adjusted for ex-D) and on UK and Australian individual shares. For other shares the amount varies by country. For US shares it's 85%.

HTH.