If you are trading Direxct Market Access (CFDs), holders of are able to participate in corporate actions, including share splits, dividends and rights issues. Dividends are received when a long CFD position is held overnight over the ex-dividend date, conversely if a short CFD position is held over this period the holder of the CFD must pay the dividend. The dividend is credited the day the share goes ex-dividend. Holders of physical shares may be required to wait for up to 3 months before receiving a dividend.
A similar situation occurs if the stock announces a rights issue. If you hold a long CFD position over the ex-rights date, you have the opportunity to participate in the rights issue which can often be done at a deep discount. It’s important to advise your CFD broker if you want to take up the rights. If you are short a CFD over the ex-rights date, you will become short the rights to buy stock. That is, you will need to deliver the stock at the issue price. This can often be a negative given you will need to purchase the stock at the prevailing market price in order to deliver it at the issue price.
