Glossary · Dividends
Ex-Dividend Date: The Cutoff for Getting the Next Dividend
Own the shares before the ex-dividend date and the next payment is yours. Buy on it or after, and the dividend goes to the seller.
Definition
Ex-dividend date The first trading day on which a stock trades without its declared dividend, so a buyer on or after that date does not receive the upcoming payment.
Also called Ex-date, Ex-div date.
Wednesday, ex-date. Tuesday, last day to buy. Put those two entries next to each other on the calendar and most dividend questions answer themselves: a purchase made on Tuesday, even in the last minute of the session, gets the payment, and a purchase made at Wednesday’s open does not.
Why the ex-date and record date line up
The record date is the day the company checks who its shareholders are. Your purchase only counts once it has settled. US stock trades now settle one business day after the trade date, the T+1 cycle the SEC adopted, so a buy on the day before the record date settles on the record date itself.
So the ex-date and the record date are generally the same day. Buy on the ex-date and your trade settles a day late. You miss the list. The full sequence of dates, from the board’s announcement to the day cash arrives, is set out in declaration, record and payment dates.
Sellers get the flip side. Hold the shares at the close before the ex-date and the dividend is yours, even if you sell them in the first minute of trading on the ex-date, because that sale settles only after the record date has passed, a case worked through in do you get the dividend if you sell on the ex-date.
The price adjusts
A buyer on the ex-date gets a share without the payment attached. All else equal, the stock opens lower by about the amount of the dividend.
“All else equal” carries weight. The market moves for other reasons that morning too, so the stock might open at $63.50 or $62.90, and the dividend part of the move is hard to see in a busy tape. What doesn’t change is the arithmetic: the $0.80 left the share price and arrives later as cash, so a holder is no richer on the ex-date than the night before. That arithmetic is the trouble with buying just for the payment, the subject of dividend capture rarely survives the ex-date.
What it means for options
Short a call on a dividend stock? Watch the day before the ex-date.
A call holder doesn’t receive dividends. To collect one, the holder must exercise in time to own the shares before the ex-date. When a call is in the money and its remaining time value is smaller than the dividend, exercising early can make sense for the holder, and you, as the short, may be assigned that evening and wake up short the stock on the ex-date, owing the dividend to whoever you borrowed from. That risk is covered under early assignment.
Covered call writers see the same thing from the other side. Assigned the night before, you lose the shares. The dividend leaves with them.
Open orders on the ex-date
The price drop can hit orders you left working. A sell stop placed just under the prior close may trigger at the open simply because the stock went ex-dividend. Some brokers adjust or cancel resting orders for dividends and others don’t. Check your broker’s policy, and look over any stops you have on a dividend stock the night before its ex-date.
Funds work the same way. An ETF or mutual fund that pays a distribution has its own ex-date, and its price adjusts the same way.
Where to find it
Start with the company’s dividend announcement. It gives the amount, the ex-date or record date, and the payment date, and once it is out, the same dates show up on most quote pages next to the yield and on dividend calendars that list upcoming ex-dates day by day.
What people get wrong
Buying on the ex-date. It comes from reading ex-date as the day to buy.
Another is expecting a free gain. The price drop is not a glitch. Special dividends can follow different ex-date rules. Check the announcement when a payment is unusually large. The dividends desk collects the related pages, including how the dividend is taxed once it arrives.
Readers also ask
Do I get the dividend if I buy on the ex-dividend date?
No. A purchase made on the ex-dividend date settles after the record date, so the seller receives that payment. To collect it yourself, buy during the last session before the ex-date, up to and including its closing minutes.
How much does a stock drop on the ex-dividend date?
All else equal, the opening price falls by roughly the dividend per share, because new buyers no longer receive it. Other news moves the price the same morning, so the actual change rarely matches the dividend exactly, and for a small dividend the adjustment can be hard to see at all.
Where can I find a stock's ex-dividend date?
The company's dividend announcement is the source, listing the payment per share along with every relevant date. Once it is published, the same dates appear on most quote pages and dividend calendars. Treat any date shown before the board declares as an estimate.