Glossary
Ex-dividend date
The first trading day on which a stock trades without its next dividend; buyers on or after this date do not receive it.
The ex-dividend date is the first trading day on which a stock's buyer is no longer entitled to the dividend that has been declared. If you buy before it, you get the payment; if you buy on or after it, the seller keeps it. The date matters for income investors, for options traders who may face early assignment around it, and for anyone reading a chart, because the price typically drops at the open by roughly the dividend amount.
How it works under T+1
A company announces four dates: the declaration date, the record date, the ex-date and the payment date. Ownership on the company's books depends on settlement, and US stock trades have settled one business day after the trade (T+1) since May 28, 2024. Under T+1, the ex-dividend date and the record date are normally the same business day: a purchase the day before settles on the record date, while a purchase on the ex-date settles one day too late.
Exceptions and pitfalls
- Large dividends. For distributions of 25% or more of the share price, the ex-date is set after the payment date instead.
- Buying "for the dividend" does not create free money: the price adjustment offsets the payment, and the dividend may be taxable.
- Qualified-dividend rate. In the US, the lower tax rate requires holding the shares more than 60 days in the 121-day window that starts 60 days before the ex-date.