Ex-Dividend Date

The ex-dividend date is the critical date that determines who gets the dividend. Buy the stock before the ex-dividend date and you get paid. Buy on or after the ex-dividend date and you miss out.

How Dividend Dates Work:

1. Declaration Date: Company announces the dividend (amount and payment date).

2. Ex-Dividend Date: First day stock trades WITHOUT the dividend. Buy on this date = no dividend for you.

3. Record Date: The company checks who owns the stock. Usually 1-2 business days after ex-dividend date.

4. Payment Date: Dividend is deposited to shareholders' accounts.

The Key Rule: You must own the stock BEFORE the ex-dividend date to get the dividend.

Example Timeline:

• Monday, March 10: Declaration date (dividend announced: $0.50/share, payment May 1)
• Thursday, March 27: Ex-dividend date
• Friday, March 28: Record date
• Wednesday, May 1: Payment date

To Get the Dividend: Buy by Wednesday, March 26 (day BEFORE ex-dividend date). If you buy on March 27 or later, you don't get the March dividend.

Stock Price Behavior:

On the ex-dividend date, the stock price typically drops by approximately the dividend amount:

• Stock trading at $50
• Dividend: $0.50
• Ex-dividend date: Stock opens around $49.50

Why? The value of the dividend is no longer "built into" the stock price.

Dividend Capture Strategy:

Some investors try to "capture" dividends by:

1. Buying stock right before ex-dividend date
2. Collecting the dividend
3. Selling immediately after

Problem: Stock price drops by dividend amount, negating the gain. Plus you pay:

• Trading commissions (if any)
• Short-term capital gains tax on price movements
• Dividend taxes

Tax Implications:

To qualify for preferential dividend tax treatment (15% vs. ordinary income rates), you must hold the stock for 60 days during the 121-day period around the ex-dividend date. Quick dividend capture = taxed as ordinary income (10-37%).

Calendar Considerations:

Most U.S. stocks pay quarterly dividends:

• Q1: Ex-dividend dates typically February-March
• Q2: May-June
• Q3: August-September
• Q4: November-December

Dividend Reinvestment Plans (DRIPs):

If enrolled in a DRIP, dividends automatically buy more shares on the payment date. The ex-dividend date still matters for which dividend cycle you qualify for.

Special Dividends:

Occasionally companies issue one-time "special dividends" (often after selling a business unit). These follow the same ex-dividend date rules but are unpredictable.