Long-term investing
Ex-dividend date
Definition
The ex-dividend date is the first day a stock trades without its next dividend: if you buy on or after it, the payment goes to the seller. With US stocks now settling one business day after the trade (T+1), the ex-date usually falls on the record date, so you need to buy at least one business day before it. The share price often opens lower that day by roughly the dividend amount.
Example
Say a company declares a $0.80 dividend with a record date on a Thursday, so the ex-dividend date is that same Thursday. Buy the stock on Wednesday or earlier and the dividend is yours; buy it on Thursday and it goes to the seller. A stock that closed at $40.00 on Wednesday may open near $39.20 on Thursday, so buying the day before just to collect the dividend does not create extra value.
Hypothetical numbers, for illustration only.
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