Ex-Dividend

Key takeaways

• The ex-dividend date (ex-date) determines who is entitled to a declared dividend: buyers on or after the ex-date do not receive the next payout; sellers do.
• The ex-date is typically one business day before the record date because of trade settlement rules (T+1).
• On the ex-date a stock typically drops by roughly the dividend amount, though market forces can alter that movement.
• Special rules apply for stock dividends or large cash dividends (generally ≥25% of value).

What is the ex-dividend date?

When a company declares a dividend, it sets several dates to determine who gets paid. The ex-dividend date is the first date on which buying the stock does not confer the right to the upcoming dividend. If you purchase the stock on or after the ex-date, the seller—not you—will receive the declared dividend. To get the dividend, you must buy the stock before the ex-date.

How the dates work

Key dividend-related dates and what they mean:
* Declaration date: The company’s board announces the dividend and the important upcoming dates.
* Ex-dividend date (ex-date): The stock begins trading without the dividend entitlement; buyers on or after this date are not eligible.
* Record date: The company reviews its shareholder register to determine who gets the dividend. The record date is usually one business day after the ex-date.
* Payment date: The date the dividend is paid to eligible shareholders.

Why the ex-date precedes the record date: stock trades typically settle one business day after the trade (T+1). To be recorded as a shareholder on the record date, you must have purchased the shares before the ex-date so that settlement completes in time.

Tip: Some broker platforms append an “XD” suffix to a ticker to indicate it is trading ex-dividend.

Price effect on the ex-date

A stock’s price often falls on the ex-date by about the amount of the dividend because the payout reduces the company’s value per share. In practice, daily price movements and market sentiment mean the change may be smaller or larger than the dividend amount. For very large cash dividends or stock dividends, market behavior and specific exchange rules can produce different price dynamics.

Special rule: If a company issues a stock dividend or a cash dividend equal to 25% or more of the stock’s value, the ex-dividend date is normally set to the first business day after the dividend is paid, not before the record date.

Simple example

Suppose Company XYZ declares a $0.53-per-share dividend, sets the record date as May 6 and the ex-dividend date as May 5. Any investor who buys the stock on May 5 or later will not receive that $0.53 payment; only those who owned the shares before May 5 will.

Practical implications for investors

• Income-focused investors should buy before the ex-date if they want the upcoming dividend, but buying just before the ex-date generally doesn’t create profit because the share price typically falls by the dividend amount.
• Dividend capture strategies (buying before the ex-date and selling after) are often neutral after accounting for price adjustments, transaction costs, and taxes.
• Always check the announced dates and your broker’s settlement practices to confirm entitlement.

Plain-language summary

A company announces a dividend and sets dates that decide who gets the money. Buy the stock before the ex-dividend date and you get paid. Buy on or after the ex-date and the seller keeps the dividend. The market usually adjusts the share price to reflect whether the next payout is included.