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Understanding Simulated Dividends: A Comprehensive Guide for Traders
Understanding Simulated Dividends: A Comprehensive Guide for Traders

Simulated Dividends are payments made by a corporation to its shareholders, usually in the form of cash or additional shares.

Updated over a week ago

Overview:

Simulated Dividends are a crucial component of the investment world, often serving as a reflection of a company's financial health and its commitment to returning value to shareholders. In this article, we'll delve into the basics of dividends, their significance, and what they mean for investors.

Definition of Simulated Dividends:

Simulated Dividends are payments made by a corporation to its shareholders, usually in the form of cash or additional shares. They are typically paid from the company's profits. If a company has a dividend policy, it can decide to distribute a portion of its earnings back to its shareholders.

Why Companies Pay Simulated Dividends:

  • Rewarding Shareholders: Simulated Dividends are a way to share a portion of the company's profits with its shareholders.

  • Attracting Investors: Regular dividends can make a stock more attractive to potential investors.

  • Signaling Financial Health: A consistent dividend payment can be seen as a sign of a company's financial stability.

What does it mean for you?

  • Clients engaging in index trading with ThinkMarkets Broker should be cognizant of the associated dividend fees.

    • All active ThinkMarkets & Eightcap accounts will be transitioned to DXTrade by February 27th, 5PM EST. These customers should close their trades by 4 PM EST on February 26th, 2024. Failure to do so will result in trades being automatically closed or liquidated to facilitate a seamless transition to DXTrade.

  • Index simulated dividends are charged when a company that is part of the index pays dividend. Amounts can vary a lot depending on the companies that pay the simulated dividend.

  • It's noteworthy that there might be instances where no simulated dividends are paid on certain days, while on others, the dividends might amount to several virtual currency.

  • Simulated dividend amounts are presented per 1 index (10 contracts) and these charges are levied post-rollover period, typically around 00:10 server time.

  • Please note both the virtual daily drawdown and virtual max drawdown breach on an account include simulated commissions, simulated swap fees and simulated dividends (only on ThinkMarkets) as well.

How to calculate simulated dividends?

  • Formula: Total number of contracts x simulated Dividend fees.
    For example- 1 lot trade on SPX500;
    1 lot= 10 contracts
    If dividend is 0.114
    Then, 10 contracts x 0.114= $1.14.

  • There is a weekly file attached below that consists with the information about the upcoming simulated dividends.



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