A dividend trading opportunity for you?

British American Tobacco is due to pay a dividend of 48.8p per share/1.4% on Thurs 4 Oct

• The chart shows British American Tobacco share price movements since July.
• British American Tobacco pays a 48.8p dividend. Currently at 3453p (at time of writing).
• Shares -29.8% from 2018 highs; +3.7% from 2018 lows; -29.3% year-to date
• All CFD positions held over 4.30pm on Weds, 3 Oct will be paid a dividend at 7:15am on Thurs, 4 Oct.
• Those using British American Tobacco CFDs receive the dividend 31 days earlier than those using shares.
• On the day the shares trade ex-dividend the share price tends to drop by the same amount

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Trading British American Tobacco – An Example

Let’s say you like British American Tobacco, and would like to get the 48.8p/1.4% dividend. You decide to buy exposure to £10,000 worth of British American Tobacco using a CFD, at the current price of 3544p. To do this, you need £2,000.

Shares that go ex-dividend typically fall by the amount of the dividend on the ex-dividend date. Many shares then tend to recover over a period of time, helped by dividends being reinvested, creating a dividend recovery trade opportunity.

Assuming British American Tobacco shares recover to their pre-dividend share price, your profit from the dividend would be £140, from your initial investment of £2,000.

Be aware that the share price could fall or rise, which could mean that you make an overall loss or increased profit on the position. For example, let’s assume that British American Tobacco falls 2% at the same time it pays the dividend. You overall net loss on your £10,000 position would be £200.

This is provided for information purposes only. It should not be taken as a recommendation.