The ex-dividend date, or ex-date, is the first trading day on which a share is bought and sold without the right to its next declared dividend. Anyone who buys on or after the ex-date does not receive that payment; the seller keeps it. Anyone who buys before the ex-date, and still holds the shares at the start of the ex-date, does receive it. The date is set by exchange rules, not by the company itself, which only declares the record date and the payment date.
The ex-date is not a period of time between the announcement and the payment, as some older glossaries suggest; it is a single day, fixed so that trades made before it will have settled by the record date. Because it depends on the settlement cycle, it has moved as settlement has become faster. In the United States, since the move to one-business-day (T+1) settlement on 28 May 2024 under rules adopted by the Securities and Exchange Commission, the ex-date for an ordinary cash dividend is normally the same day as the record date.
The ex-dividend date in plain terms
Imagine a club that sends a gift to everyone on its membership list at 5 pm on Friday. Joining takes one working day to process. If you sign up on Thursday, your name is on the list by Friday and you get the gift. If you sign up on Friday, your name only appears on Monday and you miss it. Friday is the "ex" day: the first day on which signing up no longer gets you the gift.
Shares work the same way. The company pays whichever shareholders are on its register on the record date, and a purchase only reaches the register once the trade settles. The ex-date is simply the first day on which a purchase would settle too late.
How the ex-date relates to the other dividend dates
A cash dividend involves four dates: declaration, ex-dividend, record and payment. With US T+1 settlement, an example looks like this:
- Declaration date, Thursday 26 February 2026: the board announces a dividend with a record date of Friday 13 March and a payment date of Thursday 2 April.
- Last day to buy with the dividend, Thursday 12 March: a purchase that day settles on Friday 13 March, so the buyer is on the register.
- Ex-dividend date and record date, Friday 13 March: a purchase that day settles on Monday 16 March, after the record date, so the dividend stays with the seller.
- Payment date, Thursday 2 April: the cash is paid to holders on the record-date list, usually through their broker.
Under the earlier two-day cycle (T+2), used in the United States from 5 September 2017, the ex-date fell one business day before the record date; under T+3 it was two business days before. The rule change took effect for record dates from 29 May 2024; during the switch-over, a record date of 28 May 2024 carried an ex-date of 24 May, because 27 May was the Memorial Day holiday. Canada and Mexico moved to T+1 on 27 May 2024, while the UK and the European Union plan to do so on 11 October 2027; until then ex-dates there normally fall one business day before the record date, and on the London Stock Exchange they are usually set on Thursdays.
Large distributions and due bills
A different rule applies when a distribution is very large relative to the share price. Under FINRA Rule 11140 and the matching exchange rules, if a dividend or distribution is 25% or more of the share's value, the ex-date is the first business day after the payment date. Shares sold between the record date and that ex-date trade with a "due bill", an obligation for the seller to pass the dividend on to the buyer when it is paid. The same applies to many stock splits paid in the form of a stock dividend. The transfer agent and the central securities depository handle these adjustments as part of capital market settlement.
Price effects and trading around the ex-date
On the ex-date the market price usually opens lower by roughly the amount of the dividend, because new buyers no longer receive it; taxes and ordinary market movement mean the drop is rarely exact. Brokers may adjust or cancel open limit orders and stop orders on that date, depending on their rules.
Several practices revolve around the date:
- Dividend capture is buying just before the ex-date and selling soon after to collect the payment, often aimed at shares with a high dividend yield. The expected price drop, trading costs and tax usually remove most of the gain.
- Holding-period rules use the ex-date. In the United States a dividend is only "qualified" for lower tax rates if the shares were held for more than 60 days in the 121-day period starting 60 days before the ex-dividend date.
- Investors who are short the shares on the ex-date owe the dividend to the lender, as explained under long and short positions.
Ex-dates for funds
A mutual fund sets its own ex-date for income dividends and capital gains distributions. On that date its net asset value per share falls by the amount distributed. Shareholders who choose dividend reinvestment usually have the distribution reinvested at that day's NAV. In a taxable account, buying fund shares just before a large distribution means receiving part of the purchase price back as taxable income, which investors call "buying the dividend". An exchange-traded fund follows exchange rules in the same way as an ordinary share.