Spread Bets Pay Partial dividends

You may or may not be aware that spread betting pays dividends on long equity and index positions held as daily rolling spread bets, so in this respect longer-term spread betting is a viable alternative to standard share dealing. However, the treatment of dividends on spread betting platforms differs from the treatment of dividends in regular brokerage accounts in three respects:

  • In a spread betting account you receive the dividend adjustment credit on the ex-dividend date rather than at a later payment date
  • On short spread bet positions, the dividend amount is debited from (not credited to) your account for the benefit of those traders on the opposite (long) side of your short trade.
  • You receive a lower 80%-90% of the dividend on a long spread bet, and pay up to 100% of the dividend on a short spread bet, depending on the spread betting company that you trade with.

The third point is most interesting because it is specific to your choice of spread betting provider.

Who Pays What Percentage of Dividends?

In some cases it is surprisingly (or perhaps not so surprisingly) difficult to find information on the dividend payout policy of particular spread betting companies. Unless you drop them an email to ask explicitly, the first time you will find out what % of the dividend you’ll get is when it is actually credited to your account. The dividend payout policy can change over time, but as a rough guide at the time of writing I understand the following to be true:

  • Ayondo credit 100% of the declared dividend so they are by far the fairest
  • SpreadEx credit 90% of the declared dividend (net of 10% withholding tax that they incur) on your long equity positions and they debit 90% of the declared dividend on your short equity positions. This also appears to be the case with IG Index and ETX Capital too.
  • The London Capital Group home brands including Capital Spreads, InterTrader and Tradefair credit a lower 80% of the declared dividend on your long equity positions and they debit a higher 100% of the declared dividend on your short equity positions. So effectively, LCG are taking an additional 10% “haircut” over and above what the other companies take in lieu of their ‘withholding tax’.

And the winner isn’t…

Rather than declaring an outright winner on this criterion, it is more a case of declaring who the winner isn’t. On this basis, the winner when it comes to the dividend payout policy isn’t the London Capital Group who only payout 80% of dividends. Ayondo pay the full dividend – you can’t have it much fairer than that can you? Some providers say that they pay the declared dividend less the 10% withdholding tax which they incur but to-date I haven’t found any proof of that – its more like providers retain the 10% – 20% as profit.

Dividends are Not the Only Criteria

As a longer-term more investment-oriented position trader, dividend credits are more important to me than they would be to a short-term day trader or a medium-term swing trader. Traders who fall into those two categories might not care about the dividend payout policy and will judge a spread betting account on other criteria.To some extent, even I don’t care if I receive 80% or 90% of the declared dividend when other criteria are taken into account. For example: whereas the London Capital Group home brands fall down on the dividend payout criterion, they also happen to have the best support for guaranteed stop orders — which are also important to me.