In plain English
Companies set a cut-off for who gets the next dividend. The ex-dividend date (or ex-date) is the first trading day on which a new buyer will not receive it. To get the dividend, you need to buy the shares before the ex-date.
Example
A company announces a $0.50 dividend with an ex-dividend date of March 14. If you buy on March 13, you receive it. If you buy on March 14 or later, the seller keeps it.
Why it matters
On the ex-date, the share price normally drops by roughly the amount of the dividend, because that cash is no longer part of the share’s value. Buying just before the ex-date to “collect” a dividend therefore does not create free money.
In the US, since settlement moved to one business day in 2024, the ex-dividend date and the record date are normally the same day. Other markets can differ.
Common mistakes
- Thinking you get the dividend if you buy on the ex-date.
- Buying only for the payout and ignoring the price drop that follows.