A dividend trading opportunity for you?
Royal Mail is due to pay a dividend of 17p per share/8% on Thurs 25 Jul
- Royal Mail pays a 17p/8% dividend. Currently at 217p (at time of writing).
- Shares -29.6% from 2019 highs; +13.1% from 2019 lows; -20.2% year-to date.
- All CFD positions held over 4.30pm on Weds, 24 July will be paid a dividend at 7:15am on Thurs, 25 July.
- Those using Royal Mail 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.
Trading Royal Mail – An Example
Let’s say you like Royal Mail and would like to get the 17p/8% dividend. You decide to buy exposure to £10,000 worth of Royal Mail using a CFD, at the current price of 217p. 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 Royal Mail shares recover to their pre-dividend share price, your profit from the dividend would be £800, 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 Royal Mail 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.