I understand that if I close a short position on the ex-dividend date then I owe the lender the dividend. It is taken from my account.

Where does the money the company pays for the dividend on those shares go?


When shares are shorted by B, they are borrowed from A and they are sold to C.

A has a book entry for ownership of the shares but the actual shares are owned by C who receives the dividend from the company. If B is short the shares on the ex-div date, he is required to reimburse A (the lender of the stock) for the dividends that he missed.

  • ^ this. In effect the shares get sold twice, the company obviously won't pay dividend twice just because someone shorts their stock. – xyious Jul 15 '19 at 18:54
  • @xyious - Paying dividends by the company has nothing to do with shares getting sold twice. The problem is that there are two owners of the same shares on the ex-div date, due to the shares having been shorted and only one of the owners possesses the physical shares and receives payment from the company. – Bob Baerker Jul 15 '19 at 19:10
  • Yes, we're in agreement, I just didn't make myself as clear as you did. – xyious Jul 15 '19 at 19:20

So B "sells" to open 1 day prior to the exdate…

as such C is the buyer and due a dividend? But A still gets the dividend so is paid from B. So the company who issues the stock pays... C..?? Then B buys to close and keeps the diff of stock prices(+or-) minus the dividend payment which becomes part of the cost basis.....??

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