Ex-Date

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Ex-Dividend Date (Ex-Date): Definition and How It Works

What is the ex-dividend date?

The ex-dividend date (ex-date) is the cutoff day that determines which shareholders are eligible to receive an upcoming dividend. If you buy a stock on or after its ex-dividend date, you will not receive the next dividend. On the ex-date the stock typically begins trading “ex‑dividend,” reflecting the pending payout.

Key dates in the dividend process

There are four primary dates to know:

  • Declaration date — The company announces the dividend amount and the schedule.
  • Record date — The date the company uses to identify shareholders who will receive the dividend (shareholders of record).
  • Ex-dividend date — Typically set one business day before the record date (in markets with T+2 settlement). Buyers on or after this date are not entitled to the upcoming dividend.
  • Payable date — The date the dividend is actually paid to eligible shareholders.

Why the ex-dividend date exists

Because trades take time to settle, exchanges designate an ex-dividend date so the company can determine who appears on its shareholder list by the record date. In many markets (including U.S. equities with T+2 settlement), the ex-date is generally one business day before the record date.

How the ex-dividend date affects stock price

On the ex-dividend date, a stock’s price usually drops roughly by the dividend amount because the company’s assets are reduced by that payout. For example, if a stock pays a dividend equal to 2% of its price, the share price may fall by about 2% on the ex-date. This means:

  • Buyers after the ex-date may acquire shares at a lower price that reflects the missed dividend.
  • Sellers who sell on or after the ex-date still receive the dividend (if they held the shares through the ex-date), while sellers who sell before the ex-date forfeit the dividend.

Example

Company announces a dividend on July 30.
* Record date: Aug. 8
* Ex-dividend date: Aug. 7 (buyers on or after Aug. 7 are not eligible)
* Payable date: Sept. 6

In this example, shareholders who owned the stock by the close of business on Aug. 6 (one business day before the ex-date) would be entitled to the dividend.

Common questions

  • Will I get the dividend if I sell before the ex-dividend date?
    No. If you sell before the ex-date you forfeit the right to the upcoming dividend because you won’t be a shareholder of record on the record date.

  • How long must I hold a stock to receive its dividend?
    You must own the stock before the ex-dividend date. Holding through the ex-date (or selling on or after it) preserves your right to the dividend.

  • Is it better to buy before or after the ex-dividend date?
    It depends on your goals. Buying before the ex-date secures the dividend, but the share price typically drops by the dividend amount on the ex-date. If you’re focused on total return rather than just collecting the dividend, timing around the ex-date often has little net effect after accounting for price adjustment and taxes.

Takeaway

The ex-dividend date determines dividend eligibility. Know the declaration, ex-dividend, record, and payable dates to time purchases and sales if receiving the dividend matters to your strategy. Remember that market prices usually adjust on the ex-date to reflect the upcoming payout.