# Ex-Dividend: Meaning and Date

![Ex-Dividend](https://www.investopedia.com/thmb/CWkurmNMwEuN4l23yys4mhZpXM8=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/Ex-Dividend-73326ee2cff9411dbe8504bf434bbe3b.jpg)

*— Investopedia / Xiaojie Liu*

> **Definition**
>
> The ex-dividend date is the deadline for investors to own a stock to receive a declared dividend.

## What Is Ex-Dividend?

A dividend is a cash payment to shareholders as a reward for investing in company stock or [equity](https://www.investopedia.com/terms/e/equity.asp) shares. Ex-dividend means a company's dividend allocations have been specified. The ex-dividend date or "ex-date" is usually one business day before the record date.

Investors who purchase a stock on its ex-dividend date or after will not receive the next [dividend](https://www.investopedia.com/terms/d/dividend.asp) payment. Instead, the seller gets the dividend. Investors only get dividends if they buy the stock before the ex-dividend date.

### Key Takeaways

*   Ex-dividend means a company's dividend allocations have been specified.
*   The ex-dividend date is when the stock begins trading without the subsequent dividend value.
*   Investors who purchase stock before the ex-dividend date are entitled to the next dividend payment, while those who purchase stock on or after the ex-dividend date are not.

## Ex-Dividend Date

A stock trades ex-dividend on and after the ex-dividend date or [ex-date](https://www.investopedia.com/terms/e/ex-date.asp). Investors who buy a stock on the ex-dividend date or after will not receive the next dividend payment. Since buyers aren't entitled to the next dividend payment on the ex-date, the stock will be priced lower by the amount of the dividend by the exchange.

> **Tip**
>
> Some broker platforms might use an XD suffix to the stock's ticker to indicate it is trading ex-dividend.

## Declaring Dividends

When a company declares a dividend, its board of directors establishes a record date when investors must be on record as shareholders to receive the dividend payment. Once the record date is set, the ex-dividend date is also determined according to the exchange rules on which the stock is traded.

The ex-dividend date is one business day before the record date. For example, if a company declares a dividend on March 3 with a record date of Monday, April 11, the ex-dividend date would be Friday, April 8, because it’s one business day before the record date. The ex-dividend date is before the record date because of how stock trades are settled.

After a stock trade, the transaction isn't settled for one business day, known as the "[T+1](https://www.investopedia.com/terms/t/tplus1.asp)" settlement. Investors with stock on Thursday, April 7 that is sold on Friday, April 8 would still be the [shareholder of record](https://www.investopedia.com/terms/h/holderofrecord.asp) on Monday, April 11, because the trade hasn't settled. However, if the stock sold on Wednesday, April 6, the trade would be settled on Thursday, April 7, before the ex-dividend date of Friday, April 8, and the new buyer would be entitled to the dividend.

![Record Date](https://www.investopedia.com/thmb/1VVKVQ9nuCCCi5_3zO60UMmlX0Y=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/recorddate.asp-final-6a2177f6c0da42279a202b6b30a17d52.png)

*Investopedia / Julie Bang. — Julie Bang / Investopedia*

## Stock Price and Ex-Dividend

On average, a stock price will drop slightly less than the dividend amount. Given that stock prices move daily, the fluctuation caused by small dividends may be difficult to detect. The effect on stocks from larger dividend payments can be easier to observe.

If a company issues a dividend in stock instead of cash or the [cash dividend](https://www.investopedia.com/terms/c/cashdividend.asp) is 25% or more of the value of the stock, the ex-dividend date rules differ. With a stock or large cash dividend, the ex-dividend date is set on the first business day after the dividend is paid.

> **Important**
>
> Stock trades do not actually settle until the day after a transaction.

## Key Dividend-Related Dates

*   **Declaration date:** This is the date when a company's board of directors announces the dividend distribution. Any change in the expected dividend can cause the stock to rise or fall quickly as traders adjust their expectations. The ex-date and record date will occur after the declaration date.
*   **Record date:** This is when the company reviews who the shareholders of record are. The record date is one business day after the ex-date.
*   **Payment date:** Dividend checks are sent or credited to investor accounts.  
    

## Explain Like I'm Five

A dividend is when a company distributes part of its earnings to shareholders. Dividends are announced well in advance, and some investors buy stocks specifically to collect the dividend.

You must own a stock before the ex-dividend date to qualify for a dividend, meaning that you must buy it the day before or earlier. Investors who buy shares on or after the ex-date will not receive the dividend.

## What Is an Example of a Dividend Payment?

Suppose Company XYZ pays a $0.53 per share dividend on June 2, 2024. The payment goes to shareholders who had purchased stock before the ex-date of May 5, 2024. The company declared the dividend on Feb. 19, 2024, and the record date was set as May 6, 2024. Only shareholders who purchased the stock before the ex-dividend date are entitled to the payment.

## Why Does the Stock Price Fall on the Ex-Dividend Date?

The price of a stock tends to rise before an ex-dividend date, to reflect the additional value of the payout. After the ex-date, the share price tends to drop by a similar amount because there is no longer an expected payout.

## How Does the Ex-Dividend Date Help Investors?

If an investing strategy is focused on income, knowing when the ex-date occurs helps investors plan their trade entries. However, because the stock's price drops by about the same value as the dividend, [buying a stock right before](https://www.investopedia.com/articles/stocks/07/ex_dividend.asp) the ex-date shouldn't result in any profits. The same applies if investors buy on or after the ex-date and get a "discount" for the dividend they won’t receive.  

## The Bottom Line

The ex-dividend date is one of four steps a company follows when paying dividends. The declaration date is when a company announces its plans for a dividend. The record date is when the company determines which shareholders are entitled to a dividend. The ex-dividend date is usually the day before the record date. The payment date is the day when dividend payments are made.

_**Correction—Nov. 28, 2023:**_ This article has been corrected to state the date when a new buyer would be entitled to a dividend.

> **Article Sources**
>
> 1.  Securities and Exchange Commission. "[Ex-Dividend Dates: When Are You Entitled to Stock and Cash Dividends](https://www.investor.gov/introduction-investing/investing-basics/glossary/ex-dividend-dates-when-are-you-entitled-stock-and#)."