Definition
The ex-dividend date is the first trading day on which a stock trades without the right to its next declared dividend; buyers on or after that day do not receive that payment.
How it works
A dividend has four key dates. On the declaration date, the board announces the amount and the schedule. The ex-dividend date is the cutoff for buyers: you must buy the shares before it to receive the dividend. The record date is when the company checks its list of shareholders, and the payment date is when the cash is paid. The ex-dividend date is set from the market's settlement cycle, the time it takes for a trade to be officially recorded, so it falls on or shortly before the record date.
On the ex-dividend date, the share price usually opens lower by roughly the dividend amount, because new buyers no longer get that cash. Normal price moves during the day can hide this adjustment, so the drop is rarely exact.
If you sell on or after the ex-dividend date, you still receive the dividend, because you owned the shares before the cutoff. Buying just before the ex-date to collect a dividend does not create free money: the price adjustment roughly offsets the payment, and taxes on dividends may reduce what you keep.
Example (hypothetical numbers)
Suppose Company X declares a dividend of $1.00 per share, and its ex-dividend date is a Tuesday.
Investor A buys 100 shares on Monday at $50, paying $5,000, and will receive 100 × $1.00 = $100 on the payment date.
Investor B buys 100 shares on Tuesday, when the price opens around $50 − $1.00 = $49, and receives no dividend.
Investor A now holds shares worth about 100 × $49 = $4,900 plus the $100 dividend, a total of $5,000, roughly the same as before.
The dividend moves value from the share price into cash; it does not add value by itself.
Common mistakes
- Thinking you must hold the shares until the record date or payment date to receive the dividend.
- Buying on the ex-dividend date and expecting to receive the upcoming payment.
- Expecting a quick profit from buying just before the ex-date while ignoring the price drop and taxes.
Related calculators
This glossary is for education only and is not investment advice. Examples use hypothetical numbers.