Ex-Dividend Date.
In plain English
The ex-dividend date is the first day a stock trades without the right to its next declared dividend attached. To receive that dividend, you must already own the shares before the ex-dividend date arrives. If you buy on or after the ex-date, the person who sold to you keeps the dividend instead. Because the company is about to pay out cash, a stock's price typically drops by roughly the dividend amount on the morning of the ex-date.
01Why it matters
Buying a stock the day before its ex-dividend date does not give you a free dividend, because the price usually falls by about the same amount. Knowing the ex-date helps you understand why a stock dipped and stops you from chasing a dividend you would not actually keep.
02The math, step by step
A company declares a $1 per share dividend with an ex-dividend date of June 12. You own 100 shares as of June 11, so you are entitled to $100. Your neighbor buys her 100 shares on June 12 (the ex-date), so she gets nothing this round, and the prior owner keeps that dividend. On the morning of June 12, the share price commonly opens about $1 lower to reflect the cash leaving the company.
03What this is NOT
The record date is the day the company checks its books for who owns shares. The ex-dividend date is the trading cutoff that, given settlement timing, determines whether your purchase lands you on that record list. They are related but not the same day.
04Receipts
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Plain-English answers from our glossary. Receipts included. Never advice.
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