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Who is the counterparty on dividend receivables and payables?

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  • What kind of dividend? From a stock? From a savings account?
    – D Stanley
    Feb 3 at 2:15
  • Cash dividend on a listed stock
    – Carlene
    Feb 3 at 2:21
  • The counterparties are the company paying the dividend and the entity receiving it. What "lender" are you referring to?
    – D Stanley
    Feb 3 at 2:22
  • No one I'm particular, just wanted to understand who the counterparty would be. So the issuer is the counterparty. What about if you are short shares?
    – Carlene
    Feb 3 at 2:28
  • I shouldn't have wrote lender, wrong choice of words.
    – Carlene
    Feb 3 at 2:33

1 Answer 1

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Dividends are distributions of a company's earnings to its shareholders. You could call the company the "counterparty", but that would be a bit weird phrasing. And legally, the shareholders are the owners of the company. The executives setting the dividends are agents of the shareholders, so in some sense the money is simply being moved from one account to another; the money already belongs to the shareholders, and the company is just managing it.

With short sales, the person who sells the shares short is responsible for paying the dividends to the party that they borrowed the shares from.

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  • Note that the lender of the shares receives cash as Payment In Lieu and that results in losing favorable tax rates on qualified dividends. The payer of the PIL is subject to the investment interest and itemized deduction limitations. Feb 3 at 18:25

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