Corporate actions are events carried out by a publicly traded company that impact its shareholders. Here you will find a table detailing corporate actions events and an overview of how these actions can have an impact on your share CFD trades.
Dividends describe a company’s payment to shareholders on a per-share basis to all holders. A dividend is usually a portion of a company's profits, which it chooses to pay out to shareholders rather than reinvest in the firm.
While it may initially cause some fluctuations in stock price, the choice to issue dividends can also signal company stability while increasing value to shareholders in the long term.
On the declaration date, a company’s board of directors announces the intention to pay a dividend on a specified future date.
However, any changes to this date can have varying effects on stock performance. While a change to an earlier declaration date is generally seen as positive, a delay with no clear or reasonable explanation may negatively affect stock prices.
On this date, shares already bought and sold lose the right to be paid the most recently declared dividend. Subsequently, the value of the stock falls by the value of the dividend amount, as holders of the company's shares are no longer entitled to the dividend.
Stock dividends are similar to cash dividends, except the dividend is paid out as additional shares instead of cash. When holding a CFD position in a stock issuing a stock dividend at OANDA, your position will be cash adjusted in the same way.
A bonus issue is where a company issues additional free shares to existing shareholders. It is similar to a stock dividend, but the funding for the bonus issue comes from a company’s retained earnings or capital instead of income.
The effect of bonus issues on individual stock prices is multifaceted. While causing short-term price fluctuations, bonus issues increase liquidity and accessibility, which may help the stock gain value in the long term.
If a stock’s price gets too high, some investors might become priced out of purchasing a stock. As a result, companies sometimes issue a “stock split” to reduce the stock price.
A stock split increases the number of shares in a company and reduces the company's share price, but does not affect the company's market capitalisation or dilute the value of shares because existing shareholders are automatically issued shares at a ratio, for example, 2 for 1.
The opposite of a stock split is called a “reverse stock split”, which typically occurs when a company's share price has dropped so much that it might deter investors from purchasing shares.
A reverse stock split consolidates the number of shares by a ratio. So a holder of 100 shares would see their position reduced to 100:1 if that’s the stock split ratio applied. If a holder holds a position of fewer than 100 shares, a cash adjustment takes place to compensate for the loss.
While a stock split doesn't change the intrinsic value of a company, it can help change overall market sentiment toward future growth potential. This change in perception can affect stock performance and, therefore, the value of an investment.
A rights issue is where a company offers its existing shareholders the chance to purchase newly issued shares, typically at a discounted price.
Companies use this as a way of raising additional capital. At OANDA, we will sell the rights issue shares automatically and provide a cash adjustment to your account for the value of the rights issue.
A merger or acquisition is where one company agrees to purchase the other, or agrees to merge with another. In these cases, we will close out any relevant positions at the resulting entitlement’s price and cash-settle to the equivalent price.
A spin-off is where a parent company distributes shares of a subsidiary to the shareholders of the parent such that this subsidiary becomes an independent company. At OANDA, we will sell the spin-off shares automatically and provide a cash adjustment to your account for the value of spin-off shares.
Dividends on some share CFDs may be subject to taxes, depending on the jurisdiction where the stock is listed. Tax treatment of dividends can differ depending on your location if tax treaties are in place.
Share CFDs on some other listed companies are not subject to taxes. However, given that our liquidity providers hold an equivalent position in the underlying shares as a hedge, they receive the actual dividend, which is subject to tax, if applicable to them.
We then pass on the economic value of this net dividend to you. In these products, the difference between the gross and the net dividend value is referred to as ‘tax equivalent’.