Talk:Ex-dividend date

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Automatic price decrease?

Regarding this paragraph: "When the market opens on the ex-dividend date, the exchanges automatically decrease the price of the stock by the amount of the dividend. This is done because the dividend payout will decrease the value of the company, as it comes directly from the company's reserves."

This seems highly doubtful. The market never automatically adjusts the price of any stock except in the case of a stock split.

It may be that investors are willing to pay less for a stock, thus the price goes down on the ex-dividend date. But many stocks continue to go up on the ex-dividend date as well. I don't think there is anything automatic about it. --scottjduffy

My experience (U. S.) is with trading preferred stock and similar securities, which have large dividends. If the expected drop doesn't occur, it pretty much always means I have the wrong ex-dividend date. Here is a quote from this website: "Specialists will otherwise automatically reduce all orders below the market by the amount of a cash dividend on the ex-dividend date." Art LaPella 21:00, 29 March 2006 (UTC)[reply]

I agree with scottjduffy: prices on the exchange are established by supply and demand, not by declaration on the part of the exchange. Anomalocaris 03:32, 11 March 2007 (UTC)[reply]

In the long run, of course prices are established by supply and demand. I and my reference are talking about what changes at the moment the market opens on the ex-dividend date. The last of the main article's 3 external links is an additional reference: it says "The price of the stock is adjusted downward on the ex-date so that the amount of the distribution is reflected in the current stock price." This is most noticeable in the case of a slowly trading, large dividend stock such as many older preferred stocks. Art LaPella 03:59, 11 March 2007 (UTC)[reply]

In the short run, of course, prices are also established by supply and demand, including the moment the market opens on the ex-dividend date. If there has been unexpected good news following the previous close, the stock might open above rather than below the previous closing price, even though buyers of the stock on the ex-dividend date don't get the dividend. I don't consider that Nasdaq article' statement to be the final word on this subject for three reasons: because of its imprecise language, because it is now almost seven years old, because it doesn't apply to stocks outside of Nasdaq. Anomalocaris 18:04, 11 March 2007 (UTC)[reply]

Yes, good news can change the bid and ask price by more than the dividend. But this is rare in the case of the preferred stocks I'm emphasizing. So these preferreds are the best test case to demonstrate what I'm talking about, and isolate this ex-dividend effect from others. I've often observed the automatic drop on the ex-dividend date.

More quotes: "Certain orders on the specialist's book are reduced when a stock goes ex-dividend, and these are detailed in the following paragraphs. All orders entered below the market are reduced on the ex-date - that is, the first date on which the new owner of stock does not qualify for the next dividend. On the ex-date, the price of the stock drops by the amount of the distribution. Orders reduced include buy limits, sell stops and sell stop limits." [1] "Open stop orders to sell and stop limit orders to sell are reduced in the same way as open limit buy orders." [2] "...all the orders on the books of specialists in American markets are reduced by the amount of the dividend when a stock goes ex-dividend." [3] "Do Not Reduce (DNR) Stipulation added to a buy or sell order instructing a broker not to decrease the limit, stop, or stop-limit price orders by the amount of the cash dividend on the ex-dividend date. When a stock goes ex-dividend, its price is usually reduced by the amount of the dividend" [4] "...NYSE rule 118 governing the ex-day adjustment of open limit orders to buy stock. This rule requires specialists to reduce open limit orders to buy stock by the dividend amount on the ex-dividend day". [5] Art LaPella 22:45, 11 March 2007 (UTC)[reply]

The sentence under discussion in this Wikipedia article is "When the market opens on the ex-dividend date, the exchanges automatically decrease the price of the stock by the amount of the dividend." A more accurate statement might be something like this: "After the close on the day before the ex-dividend date and before the open on the ex-dividend date, all open good-until-canceled limit, stop, and stop limit orders are automatically reduced by the amount of the dividend, except for orders that the customer indicated 'Do Not Reduce.'" It is open customer orders that are reduced, not the price of the stock itself.Anomalocaris 05:55, 12 March 2007 (UTC)[reply]

That sentence is probably better, although the open customer orders and specialists determine the bid and ask prices, and therefore the prices of executions after that. Art LaPella 17:48, 12 March 2007 (UTC)[reply]

It may depend on which exchange you are using. On ASX, open orders are cancelled when a stock goes ex dividend. Horatio 01:14, 17 September 2007 (UTC) =You're leaving out thr part about how some business entities dont have to pay taxes on dividends but do on capital gains, so they can afford to take the dividend and then sell the stock and still make money. And then you mike get into the buyback logic. WFPMWFPM (talk) 12:54, 17 October 2008 (UTC)[reply]

Reversion explanation

I removed this sentence: "For large dividends, the ex-dividend date is typically after the record date." In my experience, for large dividends the ex-dividend date is two business days before (with the same exceptions), just like any dividend. Perhaps you meant to say that for open-end mutual funds, the ex-dividend date is the day after the record date - that might be true.

Here is an example of a large dividend in my experience. In the June 22, 2006 Wall Street Journal, page C9, Corporate Dividend News, a large $3.3877 dividend was declared for "MS Estrn Europe Fd RNE" with a record date of "6-30" (June 30, 2006). Now turn to the June 29, 2006 Wall Street Journal, which shows how stocks traded on June 28. On page B7, bottom half where it says "CLOSED-END FUNDS", column 7, you'll find "MS EstEur RNE sx". The "x" means it went ex-dividend on that day, June 28 (see "How to Read the Stock Tables" on page C5). June 28 is two business days before June 30 as normal, as are all dividends in my experience - although I don't trade open end mutual funds. Art LaPella 18:27, 5 August 2006 (UTC)[reply]

Months later, I now know the sentence I reverted was basically right, although only for dividends much larger than my example. This is now explained in the article's current version. Art LaPella 04:01, 11 March 2007 (UTC)[reply]

Merge

Do we have to merge? Dividend is about 17K, approaching the 30K level where Wikipedia:Summary style recommends splitting off subtopics like this one down into sub-articles, like this one. We could consolidate some repeated information, both duplicated information within this article itself, and information in the Dividend article that could be summarized away, leaving this article to explain details like Columbus Day. Art LaPella 17:30, 11 April 2007 (UTC)[reply]

I am totally against merging. This an encyclopedia and not a big, fat novel that explains everything on the planet in one article. The information has to be accessible in reasonable little chunks. Otherwise my research takes twice the time. Thanks for your understanding. Hirsch.im.wald 21:40, 6 May 2007 (UTC).[reply]

Confustion about fractions of a day

The article as written goes into a great deal (and probably excessive) detail about how full days are counted, but doesn't explain what happens if trades are made during critical dates (e.g., the record date). For example, is it ownership at the close of the market, at the end of after-hours trading, at the open of market, at midnight, or some other time that is used? —Preceding unsigned comment added by 75.36.154.75 (talk) 03:48, August 29, 2007 (UTC)

How did I miss this comment? The article says "Someone who purchases the stock on or after the ex-dividend date will not receive the dividend..." If they purchase the stock before the ex-dividend date (not the record date), they don't get the dividend. Thus your answer could be "midnight", although the markets aren't open at midnight. Art LaPella 02:48, 17 September 2007 (UTC)[reply]

Selling on/after the ex-dividend date, still receive the dividend payment?

The Ex-dividend date article states:

If you buy on or prior to the ex-dividend date, you are buying in time to receive and be entitled to the upcoming dividend payment. Selling your stock on the ex-dividend date or after, means selling it without the dividend. The buyer of you stock will not receive the latest dividend payment pay-out, but would receive the next dividend pay-out if held one day prior to the next ex-dividend date.

When the owner sells the stock on/soon after (before the record date) the ex-dividend date, the owner is "selling it without the dividend." However, does this mean that the "owner" who just sold the stock will still receive the dividend pay-out? I understand that the new owner who just bought the shares will not receive the dividend pay-out because he did not buy the shares three days before the record date; however, does this mean that no one will receive a dividend payout for those shares just sold between the ex-dividend date and the record date? Or will the previous owner still receive a dividend pay-out because he owned it, originally, three days before the record date? —Preceding unsigned comment added by 165.123.231.71 (talk) 22:07, 1 November 2008 (UTC)[reply]

The previous owner gets a dividend, even though he sold it 1 or 2 days before the record date, because in a sense he still owns it until the trade settles 3 days later. Somebody always gets the dividend. The ex-dividend date determines who that somebody is. By the way, I'm changing "If you buy on or prior ..." to "If you buy prior ...". Art LaPella (talk) 23:48, 1 November 2008 (UTC)[reply]

New Question

This question is from a seller's perspective: Ex Dividend date is tomorrow Friday 13th June. Today is Thursday the 12th June. I purchased shares a year ago so I own them. If I sell them today on Thursday 12th June, I will still own the shares up until till T+3 settlement which is up to Tuesday the 17th (ignoring 2 days in the weekend) ie past the ex dividend date. Will I still be entitled to the dividend? — Preceding unsigned comment added by 203.0.77.123 (talk) 01:10, 12 June 2014 (UTC)[reply]

No. One way of stating the confusion is: do you stop owning the stock on Thursday when the order is executed at a stock exchange, or do you stop owning it on Tuesday when the settlement is complete? Thursday the 12th is before the ex-dividend date Friday the 13th, and Tuesday the 17th is the record date. Either way, you don't get the dividend. Art LaPella (talk) 04:56, 12 June 2014 (UTC)[reply]

Question

Here is the bottom lime question. In the example regarding Dupont if you buy the stock on the 11th and sell the stock on the 13th do you get the dividend? ----

Yes. The example says the ex-dividend date is August 12, so even if you sold on August 12 you get the dividend. As the article's first sentence explains, the ex-dividend date is what determines if you get the dividend. Please move this to the bottom of the page after you have read it; that's where it belongs according to Wikipedia customs and rules. Art LaPella (talk) 02:45, 5 March 2010 (UTC)[reply]

Is too XD — Preceding unsigned comment added by Gabo162000 (talk • contribs) 23:27, 6 July 2012 (UTC)[reply]

Yes, "ex-dividend date" can be abbreviated as "XD", if that's what you meant. Art LaPella (talk) 01:21, 7 July 2012 (UTC)[reply]

Completely befuddled

"An investor only needs to own the stock for one day (the record date) to be entitled to receive the dividend payment. If the investor buys before the ex-dividend date, and sells on the ex-dividend date or after, the investor will receive the dividend payment."

Which is the one day you need to own it for? The Record Date or (two business days earlier) the XD? 76.126.215.43 (talk) 04:40, 22 January 2013 (UTC)[reply]

The day before ex-dividend dateQuantanew (talk) 08:12, 22 January 2013 (UTC)[reply]

One reason to be befuddled is because there is a distinction between buying a stock, and actually owning it three business days later. That complication is explained at Ex-dividend date#Background. You need to buy it before the ex-dividend date to get the dividend. But you need to own it on the record date to get the dividend. Art LaPella (talk) 21:17, 22 January 2013 (UTC)[reply]

Unnecessarily Complicated

The intro is confusing to the layman. Simply put, dividend payments goes to whoever is/was holding the stock before the The Ex-dividend Date. — Preceding unsigned comment added by 119.247.68.90 (talk) 02:28, 18 March 2014 (UTC)[reply]

I agree that this article continues to need work. I am mystified why the editors assume that there is a sale of stock involved. For the enormous majority of dividend payments, obviously, the owner is the same before that date as after. The lede SHOULD explain that. I also think that using the word "date" to specify the time of a stock trade is sloppy and ill-considered. Last I heard, the world has an international date line, meaning that at any one second, two dates correctly describe that instant. Also, last I heard, many stocks trade on more than one exchange, and trade round-the-clock. It is good that the article describes two specific nation's rules (US and UK) but there are a multitude of other exchanges which should be covered as well. Look: the ex-div date is only important if a stock sale is transacted close to the record date. There are several actors relevant: the exchange, the brokers, and the buyer and seller. Obviously, the sale takes place between brokers on the exchange. I am guessing that any exchange will time-stamp that transaction, and hence establish the "date", but I don't know that for a fact. Keep in mind that some stocks are not traded over an exchange, hence not necessarily covered by the explanation given here. The details of establishing ownership are probably similar the world over, but again I don't know that (some countries may want to be different, just for the sake of it (eg. driving on right side of road)). This article also claims that sometime between the market close and open, that orders are reduced by the amount of dividend. I highly doubt this. If I place a sell order after market close to my broker, this claims she will reduce what price I ordered? I frankly don't know on which exchange my broker will transact the sale, do you? What this article implies, but doesn't say, is that starting at 12 am on the ex-div date and continuing to (or through) the record date, any seller of the stock will get (will own) the dividend; it will not be given to the new owner, despite the fact that the buyer owned the shares as of the record date. (It also doesn't say where the relevant clock is.)Abitslow (talk) 20:38, 24 March 2015 (UTC)[reply]

I do this stuff for a living, so I basically agree we could be overlooking things we take for granted, like what happens if there is no sale – although you yourself said "obviously" the one and only owner gets paid. Some stocks aren't traded on an exchange? Not in my experience, so I don't know. I've read about it in old books, but why would you do that when we have Internet brokers? I think that happens if you trade a huge block of stock, but that is out of my league; my guess is that the contract would determine the effective date, and thus who gets the dividend. The account statement I get from my broker (or any broker I know of) lists an unambiguous date for each trade. "round-the-clock"? Not the New York Stock Exchange or NASDAQ, and my experience is U.S. no matter how much Wikipedia wants it to be international, so there is only one date (in other places, I can only guess it depends on the time zone of the exchange). I don't have experience with placing a good-till-cancelled order after hours the day before ex-dividend (although it isn't really an order till it gets to the exchange, which would be the next day), but I do have experience with orders placed earlier being reduced. It is perhaps misleading to say that the buyer bought the stock on the ex-dividend date and owns it on the record date; it depends on how you define "bought" and "owned". For the sake of this explanation at least, if he "bought" it on the ex-dividend date, then he doesn't truly "own" it until 3 days of settlement have passed, which is after the record date. Art LaPella (talk) 03:19, 25 March 2015 (UTC)[reply]

Ambiguous Opening

".. for sales on or after the date, the seller is entitled to the dividend." It is only the 'First' seller that gets the dividend. — Preceding unsigned comment added by Preroll (talk • contribs) 06:56, 4 May 2015 (UTC)[reply]

Similarly, "For sales before this date, the dividend belongs to the new owner" (if we really meant a series of sales for the same security, the dividend belongs to the last new owner.) I made it "a sale" (singular). Art LaPella (talk) 14:11, 4 May 2015 (UTC)[reply]

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do weekend dates (when markets normally closed or closed for a holiday) count when figuring T+2 for a dividend

do weekend dates (when markets normally closed or closed for a holiday) count when figuring T+2 for a dividend 104.35.132.8 (talk) 14:14, 27 February 2024 (UTC)[reply]

No. That is, if the record date is Monday, then the ex-dividend date is the previous Friday, if no holidays interfere. Or if the record date is Tuesday, the ex-dividend date is Monday, again assuming no holidays. It gets worse if the record date is not a business day - then the ex-dividend date is the business day before the business day BEFORE the record date. To quote the article, "The ex-dividend date is normally the business day (2 days minus 1) before the record date." This edit may help. Art LaPella (talk) 15:16, 27 February 2024 (UTC)[reply]