Meaning Of X Div. And X In

The expression x d.1 and x in. (the reader remembering that a dividend is a roturn upon capital which may vary from time to time, while interest consists of a fixed uniform sum per cent) simply means that the sale or purchase of the stock so marked is exclusive of the dividend or interest, which has just been, or is about to be, declared (in the former case), or is just due, or is about to become due (in the second instance).

Meaning Of Cum Div. Or Cum In

If a stock on sale carries with it the full current dividend or interest its price is stated to be cum (with) dividend or interest.

In the event of sale of a security who is entitled to dividend or interest 1

It seems reasonable at first sight that, if a person holds a stock at the time when a periodical dividend (the exposition throughout includes the case of interest) is declared, the right to that particular amount should not pass from him when the stock is sold. He seems, so to speak, to have earned it by holding to the date of its declaration, and its diversion to the purchaser would, on a first view, appear to inflict an injury upon the seller. But in obedience to the rules of the Stock Exchange (which form the undisputed authority upon the conditions of bargains) an investor may continue to retain the ownership of the stock some days after the declaration of a dividend and yet on selling he loses the title to its payment. If he sell before a stock is marked x d. the dividend becomes the property of the buyer, although that dividend had been declared prior to the transaction. If, on the other hand, an investor purchases a stock after it is quoted x d. the dividend will not belong to him even though it be paid subsequently to the purchase.

1 "x" standing for ex, without.

The Need And Equity Of The Stock Exchange Rules

In order to show the need and equity (to both sides of the bargain) of the course pursued by the Stock Exchange some preliminary explanations are necessary.

The Practice Of Companies When Declaring Dividends

It is the practice of companies that, when the accounts for any particular period have been completed and the profits ascertained, the directors declare or announce the rate of dividend which they are able to distribute, but this declaration does not become a final decision and operative until it has been confirmed by the subsequent meeting of the shareholders. (In one company with which I am acquainted the procedure is different, for when the directors have fixed the dividend their judgment is final, and the shareholders possess no power of modification.)

A Fixed Rate Of Interest Is Not Declared

Where a fixed rate of interest is payable upon a stock (such as government or municipal securities and the debenture stocks of a railway) no declaration is needed, since the issuers of the stock are by contract bound to the payment of this rate under all circumstances.

Public Companies Close Their Transfer Registers During The Preparation Of Their Accounts

Whether the periodical payment upon stocks and shares consists of dividend or interest, it is obvious that very considerable additional labour is entailed upon the staff and officers while the preparations for declaration and distribution are proceeding. In the case of banks and agents who manage the loans of the government or municipal corporations or colonial governments, as well as in the case of companies of all descriptions which have issued stocks and shares, it is first necessary to complete, balance, check and audit the accounts, to ascertain that the list of names of the recipients to whom the warrants (or cheques) for dividend or interest are to be sent is correct, and to prepare and sign the cheques themselves to the order of the persons entitled to the payments. In respect of companies there is entailed the further laborious duty of examining the income and expenditure of the period under review, of determining the requisite reserves to be retained for present and future liabilities, and of then settling the amount of profits which may safely be distributed in the form of dividend.

Cheques For Interest Or Dividend Might Get Into The Wrong Hands

It is evident, accordingly, that if transfers of stocks and shares were accepted and recorded by a company - in other words, if changes of ownership of the stocks and shares were registered in the books - during this interval of exceptional work, the chances also of occasional error would be gravely multiplied in the issue of the cheques. A cheque for dividend, for example, might have been signed in favour of the person whose name appeared on the register. A transfer is sent in: the first name has to be expunged from the books and the purchaser's name substituted; the cheque already drawn might fail inadvertently to be cancelled, and a fresh one prepared for the new owner. Hence it is the recognised and justified practice of companies to close (or shut, as it is sometimes called) the transfer registers against fresh entries while the process of balancing and preparation is proceeding. The consequence is that the person whose name as owner of the stocks or shares appeared on the register before the books were thus closed remains on the register as the continuing owner while the closing of the books lasts, even although he has disposed of his holding during that interval. (For the new owner's title is not perfected by registration of the transfer until the books have been reopened.) The company thus virtually announces as regards this interval: - "As to the ownership of the present dividend just declared, or about to be declared, we express no judgment; we shall send the cheque to the person whose name was on our books as the owner when the books were closed, and while they remained closed for the settlement and payment of the dividend; he is the only person we can recognise, for we know nothing of any fresh transferee until his transfer is produced, and this cannot occur until our books are reopened; the settlement therefore of the question as to whom - the seller or the buyer - the amount of the cheque actually belongs, must be arranged elsewhere than by ourselves."