There is often confusion about who owns the shares when trading in the derivative of CFDs; the owner of the shares would be the stock broker or brokerage agency. Whenever you trade Contracts for Difference you're actually doing a thing that is called a swap trade; which means that you are swapping the particular physical stock for a contract. When you make these positions, you're responsible for one hundred percent of the loss and one hundred percent of the gains but don't own the stock, nor do you have rights towards the company. Sometimes the CFD trader can collect dividends if they take a 'Rights Issue'.

When the trader has opened a long CFD position they have the potential to create income dividends. These will typically be 90% from the pip and will happen when the position is still held when the stock goes 'ex-dividend' (XD), and can often take a few weeks to several weeks to be distributed. Let's say that the actual investor held the position on August 1 and then the share went ex-dividend on that date; and if the share paid 30p per share the actual dividend would be 27p.

If the trader was holding a short position when the stock goes 'ex-dividend' they're going to have to pay the amount out of their account. If the dividend is.20 pounds and the actual stock price was 8 pounds per share the total price is going to drop to 7.80 pounds. The issue to note relating to this is that the trader is really not sustaining a loss as they are paying out 20p for that dividend but are generating an income of 20p for that price drop, thus canceling one another out.

To clarify a little, not all CFD trading positions will produce dividends. For instance if the ex-dividend date is on August 1 but you closed your position on August 3, you would be eligible to receive dividends, however, in the event you opened your position on August 3 you would not be eligible for any dividends.

Ones CFDs broker will either credit your cash account or withdraw cash from your account depending on the long or short positions. It is also imperative that you realize that the dividends which are earned or lost in this derivative are not what is significant; when the shares earn dividends it is more about an investment, whereas when you're opening positions with Contracts for Difference you're speculating.