If you buy a dividend paying stock on margin and the broker lend you that stock

[Maverick2608]

“If you buy a dividend paying stock on margin and we lend that stock, you do not receive dividends but instead receive a payment in lieu of dividends. This is treated as ordinary income.”
https://www.interactivebrokers.com/...ortguide/paymentinlieuofdividends_default.htm

I guess it is attractive for the broker to lend you the shares you buy on margin, because in that case the broker does not have to borrow the money itself. It must be cheaper to pay other customers to borrow their shares than it is to borrow the equivalent amount of money.

However, the broker has to compensate you for the dividend. Consequently, I guess this arrangement is not attractive for high dividend paying stocks.

Is that a correct assumption/description of how this works?

Or does the link above just simply describe the situation, where the broker lend out the shares you buy on margin to short sellers and you are compensated by a payment in lieu of dividend.

I guess the last description makes more sense. However, I have not received a lend fee for the shares, which I normally do. Maybe the reason is that I am not entitled to a lend fee for stocks bought on margin?

 

[Robert Morse]

IMO, you are making this way to complicated. If you are long the stock by X-Div date, you get the dividend. Does not matter where it comes from. Keep in mind that all your stock is in "street name", not your name. The dividend paying company does not know you.

The stock loan business is very profitable and has been around for a long time.

 

[Maverick2608]

IMO, you are making this way to complicated. If you are long the stock by X-Div date, you get the dividend. Does not matter where it comes from. Keep in mind that all your stock is in "street name", not your name. The dividend paying company does not know you.

The stock loan business is very profitable and has been around for a long time.

I agree. However, I reside in a hostile tax environment where the tax implications seemingly differ depending on whether I receive a cash dividend or a payment in lieu of dividend. Frustrating.

 

[Robert Morse]

I agree. However, I reside in a hostile tax environment where the tax implications seemingly differ depending on whether I receive a cash dividend or a payment in lieu of dividend. Frustrating.

That is odd. I expect a CASH account should get you what you want, but consult your broker. Fully paid for securities should not be lent out. If true, you can place your longer term holdings with dividends in the CASH account and all the other trading in a margin account.

Where do you live?

 

[DeltaRisk]

That is odd. I expect a CASH account should get you what you want, but consult your broker. Fully paid for securities should not be lent out. If true, you can place your longer term holdings with dividends in the CASH account and all the other trading in a margin account.

Where do you live?

It’s really only the difference between street name and direct registration of the securities.

 

[tradingjournals]

IMO, you are making this way to complicated. If you are long the stock by X-Div date, you get the dividend. Does not matter where it comes from. Keep in mind that all your stock is in "street name", not your name. The dividend paying company does not know you.

The stock loan business is very profitable and has been around for a long time.

The poster who was replied to seems to me to be rather a very good thinker even on an absolute scale. On a relative scale, his thinking could be graded in two ways: by increasing the grade of his thinking, or by lowering the grade of the thinking of a person he could be compared to, or a combination of the two. In either case, his thinking seems to me to be excellent!

 

[sss12]

The poster who was replied to seems to me to be rather a very good thinker even on an absolute scale. On a relative scale, his thinking could be graded in two ways: by increasing the grade of his thinking, or by lowering the grade of the thinking of a person he could be compared to, or a combination of the two. In either case, his thinking seems to me to be excellent!

What ? I think RM was just explaining how X- div works on a practical basis.
I don't think he was expounding on the OP critical thinking abilities.