ex-dividend investment & finance definition

Case Study A stock's ex-dividend date should be of more interest to an investor than the dividend record date or dividend payment date. A stock must be purchased one day prior to the ex-dividend date for the buyer to claim a dividend that has been announced but not yet paid. Buy shares of stock on the ex-dividend date and the seller, not you, will receive the upcoming dividend. The ex-dividend date is two business days prior to the record date because three days are required for regular settlement of a stock transaction. Buy stock on Tuesday and you will be listed as the owner of record on Friday, the day that payment is required for the purchase. If a firm's directors have declared that a dividend will be paid to stockholders of record on Friday, you must buy the stock on Tuesday in order to have a right to the dividend. In this case the ex-dividend date is Wednesday, two days prior to the record date. Relevant dates for the stock of international petroleum giant BP are illustrated below.Notice that the record date follows the ex-dividend date by two business days for each quarterly dividend. In the first quarter you must have purchased the stock by February 20 to be listed as a stockholder on February 23 and receive the dividend on March 19. Purchasing the stock on February 21 meant you would not have been listed as a stockholder of record until February 24, one day beyond when the company determined who was to receive the dividend. A weekend or holiday between the ex-dividend and record dates lengthens the time difference to four days or three days, respectively. The schedule for BP indicates owners of the stock on the day prior to the ex-dividend date must wait nearly a month for actual payment of the dividend.