What is a dividend future?
A dividend future is a forward contract traded on an exchange. It allows investors to take a long or short position on the amount of dividends paid by a company to its shareholders for a specific maturity date in the future.
Key takeaways
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Dividend futures are forward contracts traded on exchanges that allow investors to take long or short positions on future dividend payments.
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They enable trading dividends independently of underlying stocks and are available for single companies, baskets, or equity indices on markets like LSE.
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Dividend futures are typically traded in batches of 100 or 1,000, with profits determined by settlement price differences.
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These instruments serve equity investors seeking steady income and play a significant role in derivatives pricing strategies.
Where have you heard about dividend futures?
Dividend futures are available in various financial markets, including the London Stock Exchange (LSE). They can be obtained for a single company, a basket of companies or an equity index.
What you need to know about dividend futures.
Dividend futures enable you to trade dividends independently of the underlying stock. You might want to do this if you have a particular understanding of the stock. So as well as being of interest to equity investors who want to earn a steady income, dividend estimates also play a significant role in derivatives pricing.
Dividend futures are usually traded in batches of 100 or 1,000. The profit or loss you make depends on the difference between the price you bought or sold the future at and the settlement price.
Find out more about dividend futures.
For background information, read our definitions of futures and dividend.