Every dividend comes with three dates, and confusing them is one of the most common mistakes new investors make. The ex-dividend date decides who gets the dividend. The record date is the day the company checks its register of shareholders. The payment date is the day the cash actually arrives. Buying a share on the wrong day can mean missing a dividend you thought you would receive, and it can change the price you pay.
This guide explains each date, how they relate to each other, and why the share price usually moves on the ex-date.
The three dates
The declaration date is when the board announces the dividend, its amount and the other dates. This is the first date you see in the news or the company's notice.
The ex-dividend date is the first day the shares trade without the right to the dividend. If you buy on or after this day, the seller keeps the dividend, not you. If you buy before it, you receive the dividend.
The record date is the day the company checks which shareholders are on its register. In most markets the record date is set so that it falls after the ex-date, because settlement takes a few days. Who is on the register on the record date is the test for who gets paid.
The payment date is when the company pays the dividend to shareholders. It can be weeks after the record date.
The key date for a trader is the ex-date. Owning the share on the day before it trades ex is what entitles you to the dividend. Owning it on the ex-date or later is not.
Why the ex-date matters
Suppose a company announces a dividend of 2 per share with an ex-date of Thursday, a record date of Friday and a payment date two weeks later. If you buy the shares on Wednesday, you are entitled to the dividend. If you buy on Thursday, you are not.
The rule works through settlement. A trade bought on Tuesday settles, and the shares are in your name, before the Friday record date, so you are on the register when the company checks. A trade bought on Thursday settles after the record date, so you are not. The gap between trading and settlement is why the ex-date is set before the record date, and the exact gap depends on the market's settlement cycle.
Check the settlement rules for the market you trade, because the number of days between trade and settlement differs between exchanges. Your broker can confirm the rule for a particular share.
What happens to the price
On the ex-date, the share price usually opens lower by about the amount of the dividend. This makes sense: the company has paid out cash, so the company is worth less by that amount, and the shares represent that smaller value.
Suppose a share closes at 100 on the day before its ex-date, and the dividend is 2 per share. All else equal, the share would open near 98 on the ex-date. The 2 that has left the company is no longer in the share price.
In practice the adjustment is not exact. Taxes, the wider market and news on the day all move the price, so the opening price can be higher or lower than the simple expectation. The adjustment is an expectation, not a rule.
A worked example
Suppose a company announces the following:
| Date | Event |
|---|---|
| Monday | Dividend declared: 2 per share |
| Thursday | Ex-dividend date |
| Friday | Record date |
| Two weeks later | Payment date |
An investor holds 500 shares bought on Tuesday. Because the trade settles before the record date, the investor receives 500 × 2 = 1,000 on the payment date.
A second investor buys 500 shares on Thursday, the ex-date. The trade settles after the record date, so the company does not record that investor as a shareholder for this dividend, and the investor receives nothing. The second investor paid a price that already excludes the dividend, so they have not lost anything they were owed, but they also did not get the cash.
The trap: buying for the dividend
Some investors buy a share just before the ex-date to capture the dividend, then sell soon after. This can look like free money, but the price usually drops by roughly the dividend amount on the ex-date. The shareholder receives the cash and loses the same amount on the price, before tax and trading costs. After costs, the result is often a small loss or nothing.
A second problem is that the share can move against you in the short time you hold it. Dividend-capture trades depend on the price holding up, and they cannot control the market's moves. Treat a dividend as part of the total return, as the guide on dividends explains, not as a reason to trade on a date.
Reading the dividend notice
A company's notice usually gives everything you need in one place: the amount per share, the currency, the ex-dividend date, the record date, the payment date and any tax withheld. Read it before the ex-date, not after. If the notice sets the record date and ex-date in a different order from the one you expect, the rule of that market applies, and it is better to ask your broker than to guess.
Before you place an order, check the date you plan to hold the share from against the ex-date, and confirm the settlement days for that market. Keep a note of each date for the shares you hold. Brokers can show the upcoming corporate actions on their platform, but that list is only as good as the company's notice, so cross-check it when the amount matters.
Other things to check
Currency. If you hold a share priced in another currency, the dividend may be paid in that currency. Check how it will be converted, and whether the exchange rate on the payment date affects your return.
Tax. Some markets withhold tax at source on dividends, and the amount you receive can be lower than the declared amount. Check the withholding rate and whether you can reclaim part of it.
Corporate actions. Share splits, bonus issues and rights issues can change the number of shares you hold or the price, and they can change the ex-date rules. Read the company's notice for the details.
Checklist
- Write down the declaration, ex-dividend, record and payment dates from the company's notice.
- Check that you own the share before the ex-date if you want the dividend.
- Check the settlement cycle for the market, so you know the trade date needed.
- Expect the share price to adjust on the ex-date, and judge the trade on total return.
- Check the currency and tax treatment before you plan the cash.
Key takeaways
The ex-dividend date is the first day the share trades without the right to the dividend, so you must own the share before it to receive the payment. The record date is when the company checks the register, and the payment date is when the cash arrives. The share price usually adjusts down by about the dividend on the ex-date, which means trading only to catch a dividend rarely adds value. Check the dates in the notice, the settlement cycle and the tax before you act.
This guide is for general information, not financial advice. See the disclaimer.