Suppose a stock pays a quarterly dividend of $3. You plan to hold a short position in
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Suppose a stock pays a quarterly dividend of $3. You plan to hold a short position in the stock across the dividend ex-date. What is your obligation on that date? If you are a taxable investor, what would you guess is the tax consequence of the payment? (In particular, would you expect the dividend to be tax deductible?) Suppose the company announces instead that the dividend is $5. Should you care that the dividend is different from what you expected? Discuss.
DividendA dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...
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