Ex-dividend date

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The ex-dividend date, also known as the reinvestment date, is an investment term involving the timing of payment of dividends on stocks of corporations, income trusts, and other financial holdings, both publicly and privately held. If a sale is before this date, the dividend belongs to the new owner; if on or after the date, the seller is entitled to the dividend.

If you purchase a stock on its ex-dividend date or after, you will not receive the next dividend payment. Instead, the seller gets the dividend. If you purchase before the ex-dividend date, you get the dividend.


Many publicly traded companies, and some privately held ones, provide a dividend feature to their stock. Stock shares trade fluidly on public markets, such that the state of share ownership differs at the end of each trading day, and any given share may have a series of various owners over time. When declaring a dividend, a company will designate a record date for the dividend. The practical rules of the financial system determine precisely one of the owners to receive the dividend payment, namely the owner of record who owned the share(s) at the end of the trading day on the record date. The company thus resolves payment to the share owner identified on the company's share register as of the record date. Since the process of settlement involves some days of delay, stock exchanges set an earlier date, known as the ex-dividend date (typically the business day prior to the record date) to synchronize the time for this processing. Thus the key date for a stock purchase is the ex-dividend date: a purchase on that date (or after) will be ex (outside, without right to) the dividend.

If, for whatever reason, a share transfer prior to the ex-dividend date is not recorded on the register in time, the seller is obligated to repay the dividend to the buyer when he receives it.

In the United States, the IRS defines the ex-dividend date as "The ex-dividend date is the first date following the declaration of a dividend on which the purchaser of a stock is not entitled to receive the next dividend payment."[1] The London Stock Exchange defines the term "ex" as "when a stock or dividend is issued by a company it is based upon an 'on register' or 'record date'. However, to create a level playing field when shares are traded on the London Stock Exchange during this benefit period an 'ex' date is set. Before this 'ex' date if shares are sold the selling party will need to pass on the benefit or dividend to the buying party."


After the close of business on the day before the ex-dividend date and before the market opens on the ex-dividend date, all open good-until-canceled limit, stop, and stop limit orders are automatically reduced by the amount of the dividend, except for orders that the customer indicated "do not reduce." This is done because the dividend payout will decrease the value of the company, as it comes directly from the company's reserves. At the market opening on the ex-dividend date, the stock will trade at a lower price, adjusted for the amount of the dividend paid. If a corporation is distributing something other than a cash dividend, such as rights or warrants, then the relevant date is called an ex rights date, or ex warrants date, etc.

United States[edit]

In the United States, the Securities and Exchange Commission (SEC) stipulates the T+2 rule, that stock trades settle two days after purchase. That time period was last shortened on September 5, 2017.[2] The ex-dividend date is normally the business day (2 days minus 1) before the record date. For the purpose of calculating an ex-dividend date, business days are days on which both the major stock exchanges and the banks in New York State are open.[3] Thus Columbus Day and Veterans Day are trading days, but not business days for calculating an ex-dividend date, since they are legal holidays and banks are not open.

If the record date is not a business day, then counting begins from the most recent business day instead of the actual record date.[4] For instance, if the record date is Sunday, then the ex-dividend date is the preceding Thursday, not Friday — assuming no intervening holidays.

The ex-dividend date is usually the business day prior to the record date. To be a stockholder on the record date an investor must purchase the stock before the ex-dividend date. The latest date he can buy the stock to be a stockholder on record and be entitled to the dividend would be one day prior to the ex-dividend date (this includes extended hours (pre-market and after-hours) of that day) to allow for the two stock trading day settlement of the stock purchase. If the investor purchases the stock the day before the ex-dividend date the investor would be a stockholder on the record date and would be entitled to receive the dividend payment.[5]

An investor who wishes to be entitled to the dividend does not have to wait until after the record date to sell the stock; however, the investor must hold the stock until the ex-dividend date. If the investor were to sell the stock on the ex-dividend date or afterwards, the investor would still be entitled to the dividend payment. In this example, assuming that the investor purchased the stock one day before the ex-dividend date, the investor would be a stockholder on the record date. If the investor sells the stock on the ex-dividend date, the buyer of the stock would be a stockholder one day after the record date given the two stock business trading day settlement. The person that bought the stock would not be entitled to receive the dividend.

An investor only needs to own the stock for one day (the record date) to be entitled to receive the dividend payment. If the investor buys before the ex-dividend date, and sells on the ex-dividend date or after, the investor will receive the dividend payment. More precisely, the owner at the close of trading on the record date receives the dividend, since shares may be traded frequently and have a series of owners on any given single day.


Large distributions such as special dividends or stock splits involve different ex-dividend timing formulas than for regular dividends. For example, the Nasdaq market provides a different ex-dividend timing when distributions are 25 percent or more of a security's value.[6]

Market regulators occasionally change the supervisory rules governing market trading, with the consequence of changing the ex-dividend date formulas. For example, in September 2017 the SEC shortened the T+3 rule to T+2 in U.S. securities markets, resulting in subsequent ex-dividend dates being a day later than they would have been before the change.[2] Since such a rule transition creates a day with a possible confusion of which rule applies, companies are notified well in advance of the transition, and are directed to simply avoid choosing that specific day for paying dividends.[6] Investors concerned with details of ex-dividend dates must also be aware of such rare changes to the trading system.

United Kingdom[edit]

For shares listed on the London Stock Exchange, the ex-dividend date is usually one business day before the record date. The ex-dividend date is almost always on a Thursday with the associated record date on the next Friday. Exceptions to this timetable are usually special dividends, and dividends provided by overseas issuers who only have a secondary listing on the London Stock Exchange. Prior to 9 October 2014 the ex-dividend date was usually two business days before the record date, i.e. typically Wednesdays.[7]

See also[edit]


  1. ^ "2016 Instructions for Form 1099-DIV" (PDF). Internal Revenue Service. p. 1. Retrieved August 10, 2017. 
  2. ^ a b "SEC Adopts T+2 Settlement Cycle for Securities Transactions". Securities and Exchange Commission. March 22, 2017. Retrieved August 2, 2017. 
  3. ^ "NYSE Rule 12". FINRA Manual. FINRA. Retrieved 2011-03-10. 
  4. ^ "NASDAQ - 11140. Transactions in Securities Ex-Dividend, Ex-Rights or Ex-Warrants". NASDAQ Equity Rules. NASDAQ. Retrieved 2011-03-10. 
  5. ^ "Ex-Dividend Dates: When Are You Entitled to Stock and Cash Dividends". Securities and Exchange Commission. Retrieved 6 December 2011. 
  6. ^ a b Nasdaq (September 2017). "Changes to Ex-dividend Procedures Effective September 5, 2017 to Accommodate T+2 Settlement" (PDF). Retrieved 27 September 2017. 
  7. ^ "LSE Dividend Procedures" (PDF). London Stock Exchange. Archived from the original (PDF) on 1 August 2014. Retrieved 19 April 2015. 

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