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LSDefine
Simple English definitions for legal terms
ex dividend
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A quick definition of ex dividend:
Ex Dividend: When a company pays out dividends to its shareholders, they usually have a specific date on which they will pay out. If you buy shares in the company before this date, you are entitled to the dividend payment. However, if you buy shares after this date, you will not receive the dividend payment. This is known as trading ex dividend. The first day that shares are traded ex dividend, the stock price will usually drop by the amount of the dividend payment.
A more thorough explanation:
Definition: Ex dividend means without dividend. Shares are traded ex dividend when the seller, not the purchaser, is entitled to the next dividend payment because it will be made before the stock transfer is completed. The first day on which shares are traded ex dividend, the stock price will drop by an amount usually approximating the amount of the dividend.
Example: Let's say a company declares a dividend of $1 per share and the record date is set for June 1st. If you buy shares of the company on or before May 31st, you will be entitled to receive the dividend. However, if you buy shares on June 2nd or later, the shares will be traded ex dividend, and the seller will be entitled to receive the dividend payment.
Explanation: This example illustrates how shares are traded ex dividend when the buyer is not entitled to the next dividend payment. In this case, if you buy shares after the record date, you will not receive the dividend payment, and the seller will receive it instead.