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Can't watch the video now? Scroll down for the full article:. If you have ever freaked out when your share price dipped after cum share stock went XD, this article is for you. We'll be breaking down the dividend distribution process, giving you the differences between cum dividend and ex dividend, and explain why you shouldn't freak out or invest when prices dip during XD. It is probably the best benefits you can get from owning a prosperous business as a shareholder.
Dividend payout amounts are decided by the board of directors and can be issued in the form of cash payments, as shares of stock, or other property. Some companies like REITs may pay dividends quarterly, some may payout half-yearly and others, or not most companies will only distribute once a year. If the are not good, the company management may decide not to distribute any dividends. But if the are good, it is likely that the management will distribute or declare a particular dividend.
Cum Dividend is the status of a stock when the company is preparing to pay out dividend in the near future. The 'cum dividend' status is like a notice to investors. The company would be announcing the amount of dividend that will be paid out soon.
Now, let's assume you're holding onto the stock and you decided to sell the stock during the cum dividend 'CD' period. This literally means if you own the stock during this period, you will get the dividends. Once the stock is sold during the CD period, you are no longer entitled to the dividend and hence, will NOT receive any dividends. If you don't have the stock and you decided that you want to invest in it during the cum dividend period, you will be entitled for the cum share dividend payout.
Ex Dividend is the status of a stock when the company has confirmed the list of cum share to receive the dividend. It is the classification of trading shares when a declared dividend belongs to the seller rather than the buyer. Once the company has finalized their list and declared the XD status, the list of shareholders entitled to the dividends will be 'locked in' and no further changes can be made. So ex dividend would be the reverse of cum dividend. Which means, if you buy a stock during this date or XD period, you would be excluded from receiving the dividend. The investor who decides to invest into this stock during the ex dividend date will receive no dividends.
Following our train of thought from the section, it is no coincidence that during the XD date, you'll notice that the share price will drop. Theoretically, this dip would be equivalent to the amount of dividend per share that is declared to be distributed. The reason is that when a dividend has been distributed, the cash level in the company decreases.
And so, the value of the company also decreases.
The share price then reflects this drop in the fundamental value of the company. It is only fair that the existing shareholders get less value when selling their shares and that the new shareholders would also buy in at a cheaper price, because the value of the company has dropped. On the XD day, you won't receive your cash just yet, even though they recognized who will receive the dividends.
However, you might not receive the dividends punctually on the pay date either. It will depend on the timing and process of the banking transaction. I hope you have a better understanding of the dividend distribution process, as well as an understanding of the implications of cum dividend and ex dividend.
Oximeter Stocks — Lepu vs Cum share. Usually after the company has announced its dividends, they will go cum dividend and inform of the day it goes ex dividend. Personal Finance Masterclass. Automated speed optimizations for fast site performance.
March 30, Share 3. In this installment of cum share AskDrWealth series, we are going to unravel that mystery for you. Let's get into it:. What is a Dividend? Before anything else, let us establish a common understanding of what a dividend is. Will there be a Dividend Payout? Companies decide on the frequency of their dividend distribution. A company will typically announce their Quarterly, Half-yearly or Yearly. When this happens, a series of dates will be announced by the management of the following:.
What do these three different stages mean? Let's break it down below:. Cum Dividend. First, let us make sure we're all of the same understanding Definition of Cum Dividend:. So basically, a dividend is declared, but is not paid. Scenario 1: If you sell your stock during CD Once the stock is sold during the CD period, you are no longer entitled to the dividend and hence, will NOT receive any dividends.
Scenario 2: If you bought the stock during CD If you don't have the stock and you decided that you want to invest in it during the cum dividend period, you will be entitled for the upcoming dividend payout. It is as simple as:. If you buy during CD, you get the dividend. If you sell the stock during CD, you actually don't get the dividends.
Ex Dividend. After the cum dividend date, the stock will move to the ex dividend date or 'XD' in short. Definition of Ex Dividend:. Scenario 2: If you bought the stock during CD The investor who decides to invest into this stock during the ex dividend date will receive no dividends. As a quick summary:. If you sell the stock during XD, you get the dividends. But you should definitely see it in the next few days. That is it for this session of the AskDrWealth series. Hopefully the next time you see the price drop during ex dividend, you'll not freak out! Useful Resources:.
Built a business to empower DIY cum share to make better investments. Featured on various media such as MoneyFM Read These Next. When will a stock cum share cum dividend and when will it go to ex divudend. Usually after the company has announced its dividends, they will go cum dividend and inform of the day it goes ex dividend Reply.
Very useful. Thank you for your post, it is easy to understand. Am I entitled to the divident?. Online Courses.Cum share
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