Yes there are two kinds...naked shorting is not illegal for Market Makers making a bona fide market, and since I've yet to see a large naked short proven, especially one handing out dividends, I have no idea what happens to any divs on shares that don't exist, other than, if the shares don't exist, then nothing attached to them could exist either.
Some years ago Medinah Mining was screaming short, naked and otherwise, so they paid out dividend stock in a private company, those shares are still worthless and not trading and there was no covering of any supposed short, naked or otherwise.
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