Business, Legal & Accounting Glossary
A security which no longer carries the right to the most recently declared dividend; or the period of time between the announcement of the dividend and the payment. A security becomes ex-dividend on the ex-dividend date (set by the NASD), which is usually two business days before the record date (set by the company issuing the dividend). For transactions during the ex-dividend period, the seller, not the buyer, will receive the dividend. Ex-dividend is usually indicated in newspapers with an x next to the stock or mutual fund’s name. In general, a stock’s price drops the day the ex-dividend period starts, since the buyer will not receive the benefit of the dividend payout till the next dividend date. As the stock gets closer to the next dividend date, the price may gradually rise in anticipation of the dividend.
Ex-dividend means a stock is trading without the rights to a declared dividend. When a company declares a dividend, it also sets a record date: only shareholders of record on that date receive the dividend. Once the record date is set, stock exchanges or the National Association of Securities Dealers sets an ex-dividend date, which is usually two business days before the record date. If an investor buys the stock on its ex-dividend date or after, the investor won’t get the dividend. If an investor sells the stock after the ex-dividend date, the investor still gets the dividend. While the ex-dividend date is key for investors, it has no impact on the company’s accounts: The company has the same legal obligation to pay dividends in the same amount on the ex-dividend date as the day before. In stock tables, stocks trading ex-dividend are marked with an “x”. Not surprisingly, the ex-dividend date is also known as the “ex-date.”
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This glossary post was last updated: 21st November, 2021 | 0 Views.