Cum Dividend
Candlefocus EditorThe process for buying stock cum dividend typically starts with a company publicly announcing that it will pay out a dividend. Investors interested in receiving the dividend will then want to buy the stock before the designated record date. This date is the point in the dividend period when the company requires investors to be officially on their share register in order to be eligible for the dividend payment.
The value of a stock is impacted by the future dividends that may be paid out. According to efficient market hypothesis, information on a particular stock dividend is publicly available, and thus is incorporated into the share price. Therefore, a stock purchased cum dividend may display a higher share price than a stock purchased ex-dividend (without dividend). In this case, a buyer may still receive the dividend due to their purchase, while the seller of the stock misses out and doesn’t receive the dividend.
Cum dividend stocks are typically attractive investments for income investors, since they guarantee that you’ll get the dividend once it is paid out. The important thing to remember is that investors must purchase a stock cum dividend before the designated record date to receive the upcoming dividend. Cum dividend stock purchases are open to everyone, including individual investors, institutional investors, and mutual funds.