Ex-dividend date

The ex-dividend date is the first trading day on which a stock trades without the right to receive its most recently declared dividend. To collect the dividend, you must buy the shares before the ex-date; anyone who buys on or after it does not get that payment, and the seller does.

How it works

The ex-date exists because trades take time to settle. Since the US moved to T+1 settlement on May 28, 2024, a trade settles one business day after execution. As a result, for regular cash dividends the ex-dividend date is now normally the same business day as the record date. Under the earlier T+2 cycle, the ex-date fell one business day before the record date.

There is an important exception: for large distributions, generally 25% or more of the stock's value, the ex-date is set as the first business day after the payment date. Sellers in between deliver the dividend through "due bills."

On the ex-date, the stock's price typically opens lower by roughly the dividend amount, all else equal, because new buyers no longer receive the payment.

Why it matters for traders

The ex-date is the date that actually determines eligibility, so it is the one dividend investors schedule around. Buying a stock the day before the ex-date just to capture the dividend (a "dividend capture" strategy) rarely produces a free gain, since the price drop on the ex-date offsets it, and the dividend may be taxed at ordinary rates if the holding period for qualified dividends is not met. Options traders watch ex-dates because early exercise of in-the-money calls becomes more likely the day before.

Example

Pinecrest Foods (ticker PCFD) declares a $0.45 dividend with a record date of Thursday, May 14. Under T+1, the ex-date is also May 14. An investor who buys on Wednesday, May 13, receives the dividend. One who buys on May 14 does not. If PCFD closed at $36.00 on May 13, it might open near $35.55 on May 14, all else equal.

FAQ

If I buy on the ex-dividend date, do I get the dividend?

No. You must buy before the ex-date. Buying on the ex-date or later means the seller gets the dividend.

Can I sell on the ex-dividend date and still get the dividend?

Yes. If you owned the shares before the ex-date, you can sell on the ex-date and still receive the payment.