The ex-dividend date is a term that is related to the payment of dividends. It can also be referred to as the ex-entitlement date or reinvestment date.
The ex-dividend date is the cut-off date for when an investor is eligible for the next dividend payment. The ex-dividend date is set one day before the record date (weekends and public holidays excluded).
Anyone who already holds or buys the share or stock before the ex-dividend date will be included in the next dividend payment.
Anyone who buys the share or stock on or after the ex-dividend date will not be eligible to receive the dividends in the next dividend pay-out cycle.
If a share is bought on the ex-dividend date, the next dividend pay-out will go to the seller and not the buyer.
In some cases, the share or stock price may increase shortly before the dividend payout. This is because the upcoming dividend pay-out may make a stock more attractive to investors. Thus, investors may invest to be included in the dividend pay-out cycle causing the stock price to rise.
Conversely, investors may also wait until or after the ex-dividend date to buy the stock at a lower price, as the stock price drops by the dividend amount on the ex-dividend date. And thus, are able to get the share at a lower price to compensate for the missed dividend payout.
