Cum-div is a short form of 'cum dividend' just as 'ex-div' stands for 'ex dividend'. Dividend is one of the two main forms of reward to shareholders in a company. The other is capital appreciation. When a company does well in its operations, shareholders usually get a distribution of some of the profit, by way of dividend. Dividend is usually recommended by the directors appointed by the shareholders to oversee the running of the company, but it is the shareholders that finally approve such payment, usually by a resolution in a general meeting. Such dividend payout could be in cash (called cash dividend) or by distribution of bonus shares (that is, free shares that are not paid for by the recipient) to members.
Because shares are changing hands all the time, there is the bit of challenge in determining who is entitled to a dividend, since a particular stock could have changed hands several times in a financial year. The solution is in what is referred to as closure of register, a statutory requirement for each company to fix a specific closure period with an effective date, which determines the ownership of a stock for the purpose of dividend payment. When a company declares a dividend, it also states the date of closure of its register for that purpose. The person whose name is in the company's register on the closure date is the legitimate beneficiary of the dividend. If I buy a share from you just before the register closes and my name is recorded as the owner of the stock, I will be the one to enjoy any dividend already declared.
Before that closure, shares are sold 'cum-div', that is, 'with dividend'. The price paid by the purchaser incorporates a dividend already declared but not paid. After that date, the share goes 'ex-div', that is, 'without dividend'. Any body who buys then will no longer be entitled to the dividend because the name on the register on the closure date has earned it.
What this dictates is that when you are buying or selling while a dividend has been declared but not paid, you have to determine whether you will receive the dividend already declared or not. That will depend on whether the transaction is cum-div or ex-div. If you sell cum div, you will have no basis to expect to receive the dividend, even if it was declared while you were still in ownership of the share. Similarly, if you buy ex-div, you should note that the dividend is already credited to the previous owner, even if it has not been paid. The implication of this is that the price of the transaction should reflect the status of the declared dividend: the cum-div price will be higher than the ex-dix price. When the stock goes ex-div, its price is officially adjusted down to reflect that fact.
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