The futures price of an index already prices in expected dividends that the companies of the index are expected to pay out, correct?

So can I conclude that when a company like AAPL announces a regular dividend, the stock price drops on ex dividend date, but the futures price of SPX (of which AAPL is a leading contributor), will not drop?

1 Answer 1


A futures contract is based upon a particular delivery date. In the case of a stock index futures contract is a cash settled futures contract based upon the stock index value at a particular point in time (i.e. this is when the final settlement is determined).

In your example, the S&P 500 (SPX) is a price return index - that is, it is not affected by dividends and therefore dividends are not incorporated into the index value. Dividends will affect the price of the constituent stocks (not necessarily by the same amount as the dividend) so they do have influence on the stock index value. Since the dividends are known ahead of time (or at least can be estimated), this has already been factored into the futures price by the market.

In terms of the impact of a dividend by AAPL, AAPL is approximaetely 3.6% of the index. Apple pays out dividends 4 times a year (currently paying out $0.52 dividends). Assuming the market is otherwise steady and AAPL drops by $0.52 due to the dividend and Apple is priced at around $105, this would result in a drop in the index of 0.0178% or around 0.35 points.

Interesting fact: There are some futures contracts that are based upon Total Return indexes, such as the German DAX and the above logic would need to be reversed.

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