A dividend trading opportunity for you?
RBS is due to pay a dividend of 11p per share/4.2% on Thurs 21 Mar
- RBS pays a 3.5p final & 7.5p special dividend (4.2% combined). Currently at 265p (at time of writing).
- Shares -0.9% from 2019 highs; +27% from 2019 lows; +22.7% year-to date.
- All CFD positions held over 4.30pm on Weds, 20 Mar will be paid a dividend at 7:15am on Thurs, 21 Mar.
- Those using RBS CFDs receive the dividend 29 days earlier than those using shares.
- On the day the shares trade ex-dividend the share price tends to drop by the same amount.
Trading RBS – An Example
Let’s say you like RBS and would like to get the 11p/4.2% dividend. You decide to buy exposure to £10,000 worth of RBS using a CFD, at the current price of 265p. 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 RBS shares recover to their pre-dividend share price, your profit from the dividend would be £420, 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 RBS falls 2% at the same time it pays the dividend. Your 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.