Ex-Dividend Date

Last Updated :

Blog Author :

Edited by :

Reviewed by :

Table Of Contents

Ex-Dividend Date Meaning

An ex-dividend date is one of the four important dividend dates, usually set one business day before the record date. It is a deadline; shareholders need to buy the stocks before this date to become eligible for the upcoming dividend payout. It is also called the ex-date.

The documentation pertaining to buying and selling of shares takes place during the period between the ex-date and the record date. Therefore, any transaction accomplished after the ex-date doesn't deprive the buyer of the immediate dividend payment.

Ex-Dividend Date Meaning

An ex-dividend date is a cut-off date for buying stocks from a company and claiming the next dividend payout.
The share price declines on the ex-date since the dividend payment amount is deducted from the original stock value. This way, a fair value is offered to new investors.
The US Securities and Exchange Commission (SEC) enforces the rule of T+1 for determining the ex-date—which occurs one business day prior to the record date.

How do Ex-Dividend Dates Work?

The ex-dividend date is just an eligibility criterion—stockholders need to procure shares by this date—to receive upcoming cash or stock dividend. If investors fail to purchase equity before the ex-date, they cannot claim the next dividend payment. When that happens, the dividend is credited to the seller.

The chronology of the four dividend dates set forth by a company is as follows:

The firm officially declares the dividend on the declaration date.
The payment date is disclosed—the date on which the dividend will be distributed.
The Board of Directors (BOD) ascertains the record date—it confirms the list of shareholders in the company's books.
The ex-dividend date is determined automatically—it is one business day prior to the record date.

On the ex-dividend date, the stock price decreases to adjust the dividend payment amount—to represent the fair valuation of a company's equity—in front of new investors. Therefore, if shareholders sell their shares on or after the ex-date, they will still be liable to get the recent dividend payout.

Video Explanation of Ex Dividend Date for Stocks

Other Important Dividend Dates

In addition to the ex-date, the following are three other crucial dividend dates:

Dividend Declaration Date: The dividend announcement is made on the day the company reports its earnings. On this date, the company's senior management declares the stock or cash dividend payout.
Dividend Record Date: As the name suggests, the record date is the day the company lists out the names of shareholders, who are eligible to receive the next dividend in the company's books.
Dividend Payment Date: It is the date on which the company disburses cash or stock dividend payments to their "eligible" stockholders—as announced on the declaration date.

Example

Let us assume, A to Z Ltd. announced the payment of dividends to its shareholders on January 05, 2022. Further, the board of directors confirmed February 21, 2022, as the record date—to enter shareholders' names in the company's books for dividend payment. Also, April 11, 2022, is the dividend payment date. What will be the ex-dividend date?

Solution:
The ex-date will be one business day ahead of the record date. Since the record date is Monday, February 21, 2022, the ex-dividend date will be Friday, February 18, 2022. In 2022, February 19 and 20 fall on Saturday and Sunday, i.e., weekends.

Ex-dividend Date Calendar

A sample of the dividend calendar of some top companies is given below:

Symbol	Name	Ex-dividend Date	Payment Date	Record Date	Dividend	Indicated Annual Dividend	Announce- ment Date
ABTX	Allegiance Bancshares, Inc.	02/25/2022	03/15/2022	02/28/2022	0.14	0.56	01/27/2022
BOH	Bank of Hawaii Corporation	02/25/2022	03/14/2022	02/28/2022	0.7	2.8	01/21/2022
DD	DuPont de Nemours, Inc.	02/25/2022	03/15/2022	02/28/2022	0.33	1.32	02/08/2022
HOG	Harley-Davidson, Inc.	02/25/2022	03/18/2022	02/28/2022	0.157	0.63	02/07/2022
PDF	Peoples Financial Services Corp.	02/25/2022	03/15/2022	02/28/2022	0.39	1.56	01/28/2022
PXD	Pioneer Natural Resources Company	02/25/2022	03/14/2022	02/28/2022	3.78	2.48	02/16/2022
WHD	Cactus, Inc.	02/25/2022	03/17/2022	02/28/2022	0.11	0.44	01/27/2022

(Source)

Ex-Dividend Date Vs. Record Date

An ex-date is a cut-off date for an investor to purchase company shares and receive an upcoming dividend. On the contrary, the record date is the final date for documenting the names of current shareholders—those eligible for receiving recent dividends.

The US Securities and Exchange Commission (SEC) enforces the rule of T+1 for determining the ex-date. According to this rule, a transaction takes one business day to be shown on records. Therefore, the ex-date precedes the record date by one business day. The record date, on the other hand, is decided by a company's Board of Directors.

Frequently Asked Questions (FAQs)

What does the ex-dividend date mean?

An ex-date is a deadline issued by a company. Before this date, the buyer can purchase shares and receive the upcoming dividend payout.

How to find an ex-dividend date?

The company e-mails its current shareholders to acknowledge dividend payments and relevant dates. This includes the ex-date. Alternatively, the ex-date can be determined from the record date. The ex-date will be one business day prior to the record date. Also, various websites enlist the dividend information of the prominent companies in their dividend calendars.

What happens to the stock price on the ex-dividend date?

The stock price goes down on the ex-date since the company's dividend payment per share is deducted from the share value to ensure fair valuation of the stocks for new investors.