An adjustment can be defined as the impact of a company paying out dividends on the ex-date. The share price takes a slight dip because money flows out of the company and to the shareholders. The dividend adjustment occurs at the close of business before the ex-dividend date.
What are dividend adjustments?
Suppose a listed issuer of a security in which you hold an open position announces a share sub-division, share consolidation, a bonus, cash dividend payments, or changes its capital structure through a rights issue. In that case, your broker can make an appropriate adjustment on the relevant listed share on the ex-date, or the corporate action effective day.
Long positions receive adjustments net of tax, whereas short positions get charged the declared amount of gross adjustment, when applicable. It is worth contacting your broker to determine how they implement each trading account’s adjustment.