A dividend trading opportunity for you?

BAE Systems is due to pay a dividend of 9p per share/1.5% on Thurs 18 Oct

• The chart shows the BAE share price movements since mid-Feb.
• BAE pays a 9p/1.5% dividend. Currently at 584p (at time of writing).
• Shares -13.2% from 2018 highs; +6.2% from 2018 lows; +2.0% 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 BAE CFDs receive the dividend 32 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 BAE Systems – An Example

Let’s say you like BAE and would like to get the 9p/1.5% dividend. You decide to buy exposure to £10,000 worth of BAE using a CFD, at the current price of 584p. 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 BAE shares recover to their pre-dividend share price, your profit from the dividend would be £150, 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 BAE 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.