Ex-dividend

The ex-dividend date, also known as the reinvestment date, is an investment term involving the timing of payment of dividends on of corporations, income trusts, and other financial holdings, both publicly and privately held. If a sale is before this date, the dividend belongs to the new owner; if on or after the date, the seller is entitled to the dividend.

If you purchase a stock on its ex-dividend date or after, you will not receive the next dividend payment. Instead, the seller gets the dividend. If you purchase before the ex-dividend date, you get the dividend.

Many publicly traded companies, and some privately held ones, provide a dividend feature to their . Stock shares trade fluidly on public markets, such that the state of share ownership differs at the end of each trading day, and any given share may have a series of various owners over time. When declaring a dividend, a company will designate a record date for the dividend. The practical rules of the financial system determine precisely one of the owners to receive the dividend payment, namely the owner of record who owned the share(s) at the end of the trading day on the record date. The company thus resolves payment to the share owner identified on the company's share register as of the record date. Since the process of settlement involves some days of delay, stock exchanges set an earlier date, known as the ex-dividend date (typically the business day prior to the record date) to synchronize the time for this processing. Thus the key date for a stock purchase is the ex-dividend date: a purchase on that date (or after) will be ex (outside, without right to) the dividend.

If, for whatever reason, a share transfer prior to the ex-dividend date is not recorded on the register in time, the seller is obligated to repay the dividend to the buyer when he receives it.

In the United States, the IRS defines the ex-dividend date as "The ex-dividend date is the first date following the declaration of a dividend on which the purchaser of a stock is not entitled to receive the next dividend payment." The defines the term "ex" as "when a stock or dividend is issued by a company it is based upon an 'on register' or 'record date'. However, to create a level playing field when shares are traded on the London Stock Exchange during this benefit period an 'ex' date is set. Before this 'ex' date if shares are sold the selling party will need to pass on the benefit or dividend to the buying party."

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Wikipedia