What is a key feature of dividend swaps?

A key feature of dividend swaps is that they involve payments based specifically on the future dividends expected from particular shares. This allows investors to gain exposure to the dividends without actually holding the underlying stocks. In a dividend swap, one party typically pays the fixed or expected dividends of a specific set of shares, while receiving a payment that usually represents a fixed rate or another financial metric. This structure is particularly useful for investors who want to hedge against or speculate on dividend payments without direct ownership.

In this context, payments are contingent upon the actual dividends declared, making option B the most accurate representation of how dividend swaps function. This type of financial instrument is prevalent among institutional investors looking to manage their exposure to equity dividends efficiently.