What is a cum dividend?

A cum dividend is the status of a company stock when a dividend has been declared for a later date, but payment has not been made.

The cum dividend meaning is derived from the Latin word ‘with’. In financial market practice, a cum dividend stock refers to the sale of a company share with the right to the next declared dividend.

A dividend is earnings that a company distributes to its shareholders, and is agreed and declared by the board at a regular interval. The dividend schedule varies from company to company. Some offer quarterly dividends, while others pay dividends once or twice a year.. In the circumstances that the company has not made enough profit or suffered losses, board members may decide not to issue dividends. Not all shares are eligible for dividend payment.

How a cum dividend works

After the board of the company announces a dividend payable to its shareholders, the eligible stocks will have ‘cum dividend’ status. If the shareholder sells a cum dividend stock, the buyer will be entitled to receive the next dividend. However, companies generally set a cum dividend date, or recording date and only purchases before the due date will entitle its buyers the right to the upcoming dividend payout.  

Difference between ex dividend and cum dividend

In contrast to a cum dividend, an ‘ex dividend’ is the status of a security excluding dividend as the company has confirmed and finalised shareholders’ payment. If a shareholder buys the stock after the recording date, the stock is ‘ex dividend’ and the new owner will not be entitled to the upcoming pay out. However, they will be entitled to the next declared dividend if they continue to hold the stock.