What is the ex-dividend date?
In one line: The ex-dividend date is the first day a stock trades without its next dividend. Buy on or after it and the seller, not you, gets that payment.
The dates in order
A company announces a dividend with a few dates attached.
- Declaration date: the company announces the amount and the dates.
- Ex-dividend date: the cut-off. You must own the shares before this day.
- Record date: the company checks its list of owners.
- Payment date: the money arrives, often a few weeks later.
Since US stock trades moved to one-day Settlement in May 2024, the ex-date and record date are usually the same day.
A simple example
A stock trades at $40. It will pay $0.50 per share. The ex-dividend date is Wednesday.
- Buy on Tuesday (or earlier) and hold at the close → you get the $0.50.
- Buy on Wednesday → you don't. The seller gets it.
On Wednesday morning, the price is usually lowered by about the dividend. So the stock may open near $39.50, all else equal. The money moved from the share price into the payout.
Why it matters
It explains a "drop" that isn't news. A stock that opens $0.50 lower on its ex-date hasn't had bad news. The dividend just came out of the price.
For traders, it matters for gaps on the chart and for options. Holders of call options sometimes exercise early just before an ex-date to collect the dividend.
A common mistake
Buying the day before just to grab the dividend. The price usually drops by about the same amount, so there's no free money. You may also owe tax on the dividend.
Check the ex-date on the company's investor page or your broker. "Payment date" is the one most people see, but it's the ex-date that decides.
Questions
Can I sell on the ex-dividend date and still get the dividend?
Yes. If you owned the shares before the ex-date, you get the dividend even if you sell on the ex-date.
Why does the stock price drop on the ex-dividend date?
The company is paying out cash, so each share is worth a little less. The price usually opens lower by about the dividend amount.
Is the ex-dividend date the same as the payment date?
No. The payment date is when the cash arrives, often weeks later.
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