Ex-Dividend
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 payment. Instead, the seller gets the dividend. Investors only get dividends if they buy the stock before the ex-dividend date.
Definition
Ex-dividend refers to the date when a company's dividend distribution has been determined. The ex-dividend date is usually the trading day before the record date. Investors who purchase the stock on or after the ex-dividend date will not receive the next dividend payment. Instead, the seller will receive the dividend. Investors must purchase the stock before the ex-dividend date to be eligible for the dividend.
Origin
The concept of ex-dividend originated with the establishment of the dividend distribution system. As early as the 19th century, with the development of joint-stock companies and stock markets, dividend distribution became an important way for companies to reward shareholders. The concept of the ex-dividend date emerged to clarify the entitlement to dividends.
Categories and Characteristics
Ex-dividend can be categorized into cash dividends and stock dividends. Cash dividends are profits distributed to shareholders in the form of cash, while stock dividends are distributed in the form of additional shares. The characteristic of cash dividends is that they directly increase the shareholder's cash flow, whereas stock dividends increase the number of shares held by the shareholder but do not immediately increase cash flow.
Specific Cases
Case 1: A company announces that it will distribute dividends on June 30, with the ex-dividend date set for June 29. If an investor purchases the company's stock on or after June 29, they will not receive the dividend, and the seller will receive the dividend.
Case 2: An investor purchases a company's stock before the ex-dividend date and holds the stock after the ex-dividend date. This investor will be entitled to the dividend, and if they sell the stock after the ex-dividend date, the buyer will not receive the dividend.
Common Questions
1. Why won't I receive the dividend if I purchase the stock after the ex-dividend date?
Answer: Because the entitlement to the dividend has already been determined on the ex-dividend date, purchasers after this date are not eligible for the dividend.
2. How does the ex-dividend date affect the stock price?
Answer: Typically, on the ex-dividend date, the stock price will drop by an amount roughly equal to the dividend, as the dividend has been deducted from the company's assets.
