A dividend trading opportunity for you?

Rolls-Royce is due to pay a dividend of 4.6p per share/0.5% on Thurs 25 Oct

• The chart shows the Rolls-Royce share price movements since April.
• Rolls-Royce pays a 4.6p/0.5% dividend. Currently at 873p (at time of writing).
• Shares -21% from 2018 highs; +9% from 2018 lows; +3.1% year-to date.
• All CFD positions held over 4.30pm on Weds, 17 Oct will be paid a dividend at 7:15am on Thurs, 18 Oct.
• Those using Rolls-Royce CFDs receive the dividend 30 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 Rolls-Royce – An Example

Let’s say you like Rolls-Royce and would like to get the 4.6p/0.5% dividend. You decide to buy exposure to £10,000 worth of Rolls-Royce using a CFD, at the current price of 873p. 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 Rolls-Royce shares recover to their pre-dividend share price, your profit from the dividend would be £50, 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 Rolls-Royce 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.