Legal Definitions - ex-dividend date

The ex-dividend date is a crucial calendar date that determines which shareholders are entitled to receive a company's recently declared dividend payment. If an investor purchases shares of a company's stock on or after the ex-dividend date, they will not receive the upcoming dividend payment. Conversely, if they purchase the shares before this date, they will be eligible to receive the dividend. This date is important because it effectively separates the right to the dividend from the ownership of the stock for a short period, impacting who gets paid.

• Example 1: Entitlement to a Dividend

  Imagine "Horizon Innovations Inc." announces a quarterly dividend, and its ex-dividend date is set for November 20th. An investor named Clara wants to receive this dividend. To be eligible, Clara must purchase shares of Horizon Innovations Inc. before November 20th – for instance, on November 19th. Because her purchase occurred prior to the ex-dividend date, Clara will be recorded as the shareholder entitled to receive the upcoming dividend payment.

• Example 2: Missing a Dividend Payment

  Consider the same scenario with "Horizon Innovations Inc." and its November 20th ex-dividend date. Another investor, David, decides to buy shares of the company on November 20th (the ex-dividend date itself) or any day thereafter, such as November 21st. In this situation, David will not receive the recently declared dividend payment. His purchase on or after the ex-dividend date means the right to that specific dividend payment remains with the previous owner of the shares.