Is it Worth Trading CFDs For Income and Cash Flow Using Dividends?

Cashflow is king and when it comes to trading those rules apply even more so. One of the greatest challenges a trader faces is the inconsistency of income due to market fluctuations and poor performing trading systems. Dividends can help overcome this challenge but will require a sizable chunk of money to begin with.

Income generation with CFDs - is it worth it?

If you are looking to generate an income from trading Contracts for Difference via dividends and a low maintenance strategy you might want to 'run the numbers' so to speak before jumping in. Looking at some very basic numbers gives us the following example. You buy $100,000 worth of stock using CFDs and throughout the year you earn 6% in dividend payments or $6,000. Sounds good so far right? Also keep in mind that you might need only $10,000 to run your $100,000 position means you are already earning 60% return on your $10,000 float.

Have you taken CFD financing into account?

Despite making what looks to be a fantastic return on a relatively small outlay you need to consider the overnight CFD finance that you will incur throughout the year. With CFD financing running at 2-3% about the cash rate you will be looking at around 6% per year to finance the trade. Essentially this negates the whole income producing idea behind holding good dividend producing stocks.

So what is the workaround CFD strategy to earn dividends without paying too much finance?

As you can see the basic rule of thumb is the longer you hold your Contracts for Difference position the more CFD finance that you pay. The trick then is to multiply the effectiveness of this strategy by locating good uptrending stocks that pay a solid dividend and hold for a couple of days to weeks prior to the ex-div date. Using this CFD dividend strategy will allow you to hopefully benefit from a capital appreciation of the stock you are on plus receive a healthy dividend on the ex-div date.

By doing it this way you avoid having to pay the CFD finance for a full year and only pay for the shorter period of time that you are holding the position. You get to benefit from a possible capital appreciation whilst receiving the full dividend. Also keep in mind that CFD brokers do not pay any franking credits on dividends earned through CFD trading.

Action: Discover the 7 most Critical CFD Trading Tips and 2 of the most common CFD Trading Strategies. Learn more about the Contracts for Difference (CFD) revolution by going to http://www.learncfds.com/

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