WHAT DOES SELLING A PROSPECTIVE DIVIDEND MEAN AND WHY ISSELLING A - ProProfs Discuss
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What does selling a prospective dividend mean and why isselling a prospective dividend considered unethical?



Asked by COLE, Last updated: Nov 05, 2021

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John Smith

John Smith

John Smith
John Smith

Answered Sep 08, 2016

Selling a prospective dividend refers to convincing a client to buy a stock because ofan upcoming dividend payment. first, there may not be a dividend paymentforthcoming. second, if the client is convinced to buy a stock because of a dividendthat is forthcoming, the client would receive the dividend but the price of the stockwould theoretically drop by the amount of the dividend (covered elsewhere in yourtext). so the client would be no better off than before the dividend and the brokerwalks away with a commission. the unethical part is leading the client to believe that adividend payment will result in making money on top of the capital appreciation of thestock, keeping in mind that the price of the stock will drop by the amount of dividendpaid.
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