The cutoff time for shareholders to receive credit for a future stock dividend is known as the ex-dividend date or ex-date.
Shareholders who purchased the stock before to the ex-dividend date are eligible to receive the impending dividend.
When it comes to a company’s dividend, there are four important dates to be aware of: the declaration date, the ex-dividend date, the record date, and the paying date.
The stock price normally drops by the dividend amount on the ex-dividend day.
As compensation for purchasing the firm’s stock or equity shares, a company will normally pay a dividend to its shareholders in cash. Companies typically save or accumulate their profits as they are made in an account known as retained earnings. Some businesses choose to reinvest their retained earnings back into the business, while others choose to distribute some of their retained earnings as dividends to shareholders.
We must comprehend the steps businesses take when they pay dividends to their shareholders in order to comprehend the ex-dividend date. The four crucial dates in the process of issuing a dividend are listed below.
Which of these shareholders will be eligible to receive the dividend is decided by the ex-dividend date, which is the date of that announcement. The ex-dividend date is ordinarily chosen one business day prior to the record date. A dividend will not be paid to stockholders who acquired the stock on or after the ex-dividend date. To be eligible for a dividend, shareholders must have possessed their shares for at least one full business day prior to the ex-dividend date.