Dividend Future

A dividend future is a financial derivative contract that allows investors to speculate on or hedge against future dividend payments of a company or an index. It provides the buyer with the right to receive payments based on the actual dividends paid by the underlying asset during a specific period. Investors use dividend futures to gain exposure to dividend income without having to own the underlying shares. Dividend futures are commonly traded by institutional investors looking to manage their dividend risk or take advantage of expected changes in dividend payouts.

Example

An investor buys a dividend future for a stock, expecting that the company will increase its dividend payments over the next year, and profits if the dividends rise.