If you purchase a stock cum dividend, it implies that you will be entitled to receive any declared dividends in the future. In contrast, buying a stock ex dividend means that you will not receive the forthcoming dividend payment. Essentially, cum dividend signifies “with dividend.”
Cum dividend refers to the condition in which a stock is purchased with the entitlement to any pending declared dividends. This is in contrast to ex dividend, where the buyer is not entitled to the upcoming dividend payment. For instance, in example 1, John bought 100 shares of XYZ company cum dividend and was eligible to receive $50 in dividend payments as the company had declared a dividend of $0.50 per share. On the other hand, in example 2, Sarah purchased 50 shares of ABC company ex dividend and was not entitled to the dividend payment of $0.25 per share since she bought the shares after the ex dividend date. These examples highlight the distinction between cum dividend and ex dividend.
“cum dividend” refers to a stock that is being traded with the right to receive the upcoming dividend payment. It indicates that the buyer of the stock will be entitled to receive the dividend, while the seller will not.
The dividend payment for cum dividend stocks is typically calculated based on the number of shares held by the shareholder on the record date, which is the date set by the company to determine the shareholders eligible for the dividend.
No, if you sell your cum dividend shares before the record date, you will not be entitled to receive the dividend. The buyer of your shares will receive the dividend instead.
If you buy cum dividend shares after the record date, you will still be entitled to receive the dividend. The previous owner of the shares will not receive the dividend.
Yes, a company has the authority to change the record date for dividend payments. However, they must inform shareholders in advance and follow the regulations set by the relevant securities exchange.
No, not all stocks are traded as cum dividend. Some stocks may be traded as ex-dividend, which means the buyer will not be entitled to receive the upcoming dividend payment.
Typically, the stock price of a cum dividend stock will be higher than that of an ex-dividend stock. This is because the buyer of a cum dividend stock will receive the dividend, which adds value to the stock.
No, once a stock is traded as ex-dividend, it cannot be converted back to cum dividend. The ex-dividend status remains until the next dividend payment.
If the company cancels the dividend after you have bought cum dividend shares, you will not receive the dividend payment. However, you may still be able to sell the shares to another buyer who is willing to take the risk.
There are no specific legal implications of trading cum dividend shares. However, it is important to understand the dividend payment terms and the record date to ensure you receive the entitled dividend and make informed investment decisions.
This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.
This glossary post was last updated: 17th April 2024.
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