If you’re looking for a relatively low-risk way to invest and grow your money, dividend investing could be it. But how does it work on eToro?
Let’s start from the basics.
eToro is a multi-asset trading platform, where you can invest in stocks and crypto assets, as well as trading CFDs. The platform specialises in the rather complex and high-risk world of cryptocurrency trading, as well as having a unique ‘social trading’ model. However, you can also use eToro to earn steady returns with dividend investments, which can be much more straightforward.
In this guide, we’ll give you the lowdown on eToro dividends, including how to receive them and anything else you need to know.
We’ll also cover how to fund and withdraw from eToro (which operates in USD¹) without having to convert your money each time. Open a multi-currency account with Wise and you can use US bank details with eToro and reduce the currency conversion cost.
But more on that later. First, let’s cover the basics on dividend investing, and why it could be a good investment strategy for you.
When a publicly traded company makes profits, it has the choice of a few different ways to spend the money. It can reinvest in developing the company, hold onto the money, or reward its shareholders with dividend payments.
When you buy stock in a company which pays out dividend income, you’ll earn money on a regular basis without having to sell your shares. You’ll receive a dividend payment on a monthly, quarterly or annual basis, without having to do a thing.
The amount you receive depends on the dividend yield or amount set by the company, and how much stock you own. So, for example, if the annual dividend yield is 5% and you have 1 share in the company valued at £100, you’ll receive a £5 dividend payment that year.
Dividend investment is considered to be a fairly low-risk and steady way to grow your money. It’s certainly not as thrilling as other kinds of trading or investment, but it can pay off over time.
If you have stock in many different companies across your investment portfolio, each paying out regular dividend payments, you could be earning a decent income.
Receiving eToro dividends is pretty straightforward, as your account is debited automatically. You’ll just need to make sure you’ve purchased the stock ahead of the ex-dividend date. This is when the stock begins trading without the value of its next dividend payment².
If you sell your shares before this crucial date, you’ll miss out on the dividend payment.
Here’s what you need to know about receiving dividends on eToros, on different kinds of stock.
Provided you hold a ‘buy’ position on eToro when trading a dividend-paying stock, ETF or index, you’ll receive the payment automatically.
If your position is set to ‘sell’, the payment will be deducted from your balance instead.
Like some other trading platforms, eToro also offers the opportunity to earn dividend payments on CFDs.
If you hold a CFD position by the ex-dividend date, you’ll automatically receive a dividend payment. This will be reflected in your balance by the time the ex-dividend date rolls around.
For positions secured with the real asset, you need to make sure you hold the position at least two business days before the ex-dividend date to qualify for a dividend payment. Then, you’ll receive the dividend credited to your available balance on the payment date.
As we’ve already mentioned, eToro operates its whole platform in USD. UK users can make deposits and withdrawals in GBP, but they’ll be subject to a currency conversion fee for every payment. This is on top of the standard $5 fee⁴ the platform charges for withdrawals.
Unfortunately, you can’t do anything about the eToro withdrawal fee. But there is a clever way you can reduce the currency conversion charges.
Open a Wise multi-currency account and you can top up and withdraw from your eToro account in USD. This means that you can withdraw and hold the money in USD, so you don’t have to convert everytime you withdraw and pay.
Here’s how it works. When you open your Wise account, you can also get your own Wise US account details to use. This means you can receive payments from eToro in USD just like a US local. The platform doesn’t need to convert the currency, as it would if you used your UK bank account for a withdrawal in GBP.
When your dividend payments and other trading profits land in your Wise account, you can choose what to do with it. You can hang onto the money for future eToro deposits in USD, or spend worldwide using your international Wise debit Mastercard. If you want to withdraw to your UK bank account, you’ll only have to pay a tiny fee for currency conversion at the real, mid-market rate. This gives you full control over your trading earnings.
So, there you have it - a handy, at-a-glance guide to eToro dividends and how they work. Plus, a money-saving tip for withdrawing your earnings in other currencies using Wise.
The best of luck with your dividend investments on eToro - just remember that trading often comes with risk, so make sure you’re comfortable with it before diving in headfirst.
Sources used for this article:
- etoro customer service page - conversion fee
- etoro customer service page - what is dividends
- etoro customer service page - does etoro pay dividends
- etoro page trading fees
Sources checked on 31-March-2021.
This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax or other professional advice from TransferWise Limited or its affiliates. Prior results do not guarantee a similar outcome. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date.
One of the first things you’ll need to get to grips with when using the platform for cryptocurrency trading is the eToro wallet.
We’ll cover eToro fees for deposits and withdrawals, plus any extra charges related to Stocks, ETF, CFDs and crypto asset trading.
Trading 212 has the most user-friendly interface, and the most straightforward terms when it comes to fees in particular. eToro mainly deals in crypto trading,
In this guide, we’ll cover everything you need to know about setting up a limited company for contracting in the UK. We’ll look at the advantages of using this
All you need to do to receive dividends through Trading 212 Invest and ISA is to buy your shares at the right time. Provided you have the shares before what is
Both Freetrade and Trading 212 have simple, intuitive apps, absolutely perfect for brand new traders. This is essential to help you get up and running quickly