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If I hold shares of a stock on the ex div date, I get a dividend. But if instead I were to short-sell the stock and not buy it back before that date, would I then be responsible for paying the dividend?

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3 Answers 3

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Yes, you would. You owe it to the person you borrowed the shares from.

source (updated 9/9/2023)

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  • but wouldn't the company itself pay you the dividend so you would just passing that dividend back to the owner?
    – Joe.E
    Jun 27, 2011 at 23:14
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    @Joe E - No, because you don't own the stock. You've borrowed stock from Shareholder A and sold it to Shareholder B. The company pays Shareholder B, who has the shares. But Shareholder A ought to get the dividend too, and the company is not going to pay twice for the same shares; that's what led to my question. Jun 28, 2011 at 4:27
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The answer provide by @mbhunter is correct, however there are contexts, shorting in spot market and carrying the position over settlement usually does not entail payment of dividend to the broker, one of the reason being post ex-date the price of the share downward adjusts to the extent of the dividend, so practically if you have shorted at 100 and post ex-date (assuming a dividend of 2 and no movement of the stock price), the price would slide to 98, the party who longed the stock @ 100 now is sitting on a price of 98 and received a dividend of 2 which equates to 100.

The above is also contextual to the law of the country governing the exchange and the security exchange board regulations.

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You could hold a long position in some company XXXX and then short your own shares (assuming your broker will let you do that). The dividend that would have gone to you would then go to whoever is holding the shares you short sold. You just don't get a dividend. If you're going to short in a smart way... do it on a stock you otherwise believe in, but use it to minimize the pull-backs on the way up.

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    That's not actually shorting at all, is it? It's just selling some of your stock. May 13, 2014 at 12:17
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    @RemcoGerlich I don't think that this answers the OP's question, but there is definitely a difference between selling your long position and simultaneously holding long and short positions in the same security. It's more subtle though and has nothing to do with dividends.
    – user32479
    Nov 5, 2015 at 20:54

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