“Cum dividend” is a financial term used in the context of stocks and dividends. It is derived from the Latin word “cum,” meaning “with” or “including.” In the financial markets, “cum dividend” indicates that a security, such as a stock, is trading with the right to receive the next dividend payment.

Here’s how it works:

1. **Ex-Dividend Date:**
– When a company declares a dividend, it sets an ex-dividend date. The ex-dividend date is the date on or after which a buyer of the stock will not be entitled to receive the declared dividend. In other words, to be eligible to receive the upcoming dividend, an investor must purchase the stock before the ex-dividend date.

2. **Cum Dividend:**
– On or before the ex-dividend date, the stock is said to be trading “cum dividend.” This means that the dividend is included in the stock price, and whoever holds the stock at that time is entitled to receive the upcoming dividend payment.

3. **Ex-Dividend:**
– After the ex-dividend date, the stock is said to be trading “ex dividend.” If an investor buys the stock on or after the ex-dividend date, they are not entitled to the most recently declared dividend. The dividend is effectively separated from the stock price, and it becomes the responsibility of the seller (the person who held the stock before the ex-dividend date) to receive the dividend.

4. **Impact on Stock Price:**
– Typically, when a stock goes ex-dividend, its price adjusts downward by an amount roughly equal to the dividend. This adjustment reflects the fact that new buyers will not receive the upcoming dividend payment.

In summary, “cum dividend” refers to the period during which a stock is trading with the right to receive the next dividend. Once the ex-dividend date is reached, the stock starts trading ex dividend, and the dividend becomes detached from the stock price. Investors need to be aware of these dates to ensure they understand whether they will be eligible to receive a dividend payment when buying or selling a stock.