There's a ton of information that you need to be aware of regarding dividends and that includes, investment opportunities, payments, recommended trading practices and a whole lot more.
Continue reading to get all the information you need about dividends as a trader.
What is a Dividend?
In financial terms, a dividend is the form of distributing a percentage of profits by a listed corporation to its shareholders. This usually follows a profitable year for a corporation allowing it to share a portion of its profit as "dividends" to its stockholders.
Other than paying in cash deposited to a shareholder's bank, dividends can also be paid through the issuance of additional shares or by what they call "share repurchase". In a few instances, dividends are given by assets.
If a company announced that a dividend of $0.70 per share will be distributed to shareholders, if you own 70 shares of that company, you will receive a total dividend amount of $49.
Take note: Not all corporations pay dividends to their shareholders.
Does eToro Pay Dividends?
Yes. eToro pays dividends.
Here are the instances when you can be paid with a dividend in eToro.
You will be debited or credited if you engage in trading stocks, ETF or an index distributes a dividend.
- If you hold a BUY position, the dividend will be added to your current balance
- If you hold a SELL position, your available balance will be deducted with the amount of the dividend payment.
- If you hold a CFD position, your available balance will show the dividend payment on the ex-dividend date.
- If you hold a position with a real asset, you will receive your dividend payment and see it added on your balance on the payment date.
Keep in mind:
Dividend payments are taxable in some countries. Tax rate depends on the tax laws of the country the trader is residing.
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Payment of Dividends
eToro base the dividends it pays on the positions you hold in Dividend Stocks and Dividend ETFs.
On CFDs, if you hold a CFD position, eToro will pay you a dividend on the Date of Record (ex-dividend date) that will appear in your current balance.
On real assets, in order to receive a dividend, you must hold a position prior to the closing of the market at least two days before the Date of Record (ex-dividend date).
When are the Dividends Paid?
eToro pay out its users with dividends overnight. Dividend payments are calculated by eToro as refunds and then quickly added to the amount reflected in your profits.
In case of outstanding eToro fees stemming from your holding of a particular stock, the dividend payment will subtract to the accumulated fees.
Dividend Payments vs Other Brokers
eToro is a unique trading broker platform because it offers dividends on CFD trading unlike other brokers.
Dividends on CFD Trading
There are three big opportunities to use your dividends when trading on CFD (Contracts for Difference) on eToro.
- You can earn on a rising price movement whenever you buy a stock.
- You can earn from a descending price movement when your sell a stock.
- You can use leverage on your trades.
eToro Copy Dividends: What is It?
eToro Copy Dividends allow users to also reap benefits from the profits of the traders they are copying without having to close the relationship first.
When the trader you are copying on eToro's pioneering Copy Trading feature withdraws an amount from their funds, a proportionate sum will be debited from your copy allocation and directed back to your account balance. That amount is referred to as the Copy Dividend.
Trader A has $5,000 in his account. You as a user who is copying Trader A, allocate $500 to this trader and after some time, Trader A makes a profit of $1,000. Trader A then decides to withdraw the profit, the proportional amount for you would be $100, which will be deducted from your copy allocation and directed back to your account balance. This way, you too can earn a profit without having to wait for the copy to close.
Another feature of eToro Copy Dividends is that when Trader X deposits additional fund to his/her account, you will be notified of this activity, so you can decide whether you would also want to add to your copy allocation.
When a user engages in CFD trading on eToro, they also get an opportunity to cash out on dividends.
Despite not actually buying a share of a company in CFD trading, eToro collates all positions into one single position and buys the equivalent shares in actual stock market environment. This makes it possible for eToro to get dividend payments from any listed company that shell out dividend payments.
eToro then uses this dividend payments to pay off eToro users with their own proportioned profits.
If 200 eToro users engages on (Company A) CFDs, and totaling all the positions, the exposure equals to 600 shares. eToro will then deal with the stock market where Company A is listed to actually purchase 600 shares to hold and include in its portfolio, to cash out any dividend amount.
Can One Live Comfortably Off Dividends?
Yes. It is possible to live well off dividend payments. This naturally happens when a trader started investing early and has invested on several profitable high-yielding stocks whose total dividends will be enough to cover the standard of living in the user's country of residence.
Earning Regularly on Dividends
There are no proven and exact technique on how to earn regularly off eToro dividends. However, several successful traders offer these following best trading practices advises:
- Choose the most successful companies that pay dividends.
- Diversify your investment.
- Hold on to your shares for a long-term period.
- Copy-trade a seasoned trader who earns a lot on dividends.
How to Check Dividend Payments on eToro?
To see your dividend earnings on eToro, simply follow these steps:
- Click the clock icon on your Portfolio page.
- Set the time period you want to view.
- Click the gear or wheel icon and from the drop-down menu, click "Account Statement".
- Set the starting and ending date.
- Download the statement in Excel file format.
- Click and view the "Transactions Report" sheet.
- Select "Payments Caused by Dividends".
The eToro DividendGrowth Portfolio
The DividendGrowth CopyPortfolio is an investment strategy guide created by eToro as a ready-made solution for investors in search of dividend-rich companies to invest on.
We believe that investing should be made as easy as possible for people. Ask any asset manager and they will say investing in dividend-paying stocks is one way to mitigate the downside of a volatile market.
This portfolio grouped together a number of companies using the following criteria:
- Low market volatility
- Strong market cap
- Consistent 5-year average dividend growth
- Strong dividend yield the previous year
The result is a pool of dividend-strong companies that may appeal to dividend-seeking eToro traders. Among the companies usually included in the DividendGrowth portfolio are: McDonald's, IBM, Coca-Cola and 3M.
To simply follow the DividendGrowth Portfolio, just add it to your watchlist.
The first step is to open an account. Simply click on the button to get started.
eToro is a multi-asset platform which offers both investing in stocks and cryptoassets, as well as trading CFDs.
Please note that CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 77% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.
Past performance is not an indication of future results. Trading history presented is less than 5 complete years and may not suffice as basis for investment decision.
Copy Trading does not amount to investment advice. The value of your investments may go up or down. Your capital is at risk.
Cryptoasset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.
eToro USA LLC does not offer CFDs and makes no representation and assumes no liability as to the accuracy or completeness of the content of this publication, which has been prepared by our partner utilizing publicly available non-entity specific information about eToro.