Can you short-sell a stock that is paying a dividend?

Yes, you can shortsell a stock that is paying a dividend. However, when you shortsell a dividendpaying stock, there are certain considerations and potential consequences related to the dividend payments that you should be aware of:

1. Dividend Obligation: If you are shortselling a stock, you are essentially borrowing and selling shares you do not own. When a company pays dividends to its shareholders, the shortseller is responsible for paying those dividends to the lender of the shares. This is because the lender is still the legal owner of the shares.

2. Dividend Payment Timing: Companies typically have specific dividend payment dates. If you are short the stock on the dividend "record date," you will be responsible for paying the dividend to the lender, regardless of whether you receive any dividend income from the short position.

3. Cost to ShortSeller: To compensate for the dividend payments they will owe, shortsellers often face additional borrowing costs or fees. These costs can reduce the profitability of the short position.

4. Risk of Dividend Capture: Some traders engage in a strategy known as "dividend capture" where they buy the stock just before the exdividend date (the date at which the stock begins trading without the right to receive the upcoming dividend) to capture the dividend payment. If you are short the stock and someone engages in dividend capture by purchasing it from you before the exdividend date, you will still be responsible for paying the dividend.

5. Potential for Losses: Dividend payments can increase the cost of holding a short position, especially if the stock has a relatively high dividend yield. If the stock's price rises significantly after you have shorted it, you may incur losses not only from the price increase but also from the dividend payments owed.

In summary, shortselling a dividendpaying stock is possible, but it comes with additional obligations and potential costs related to dividend payments. Traders and investors engaging in shortselling should be aware of these factors and consider the impact of dividends on their overall strategy. It's essential to understand the specific rules and costs associated with shortselling in the brokerage account you are using, as practices can vary among different brokers and markets.