What is Ex Dividend Date?: Meaning, Types & Impact on Stock Price

• The ex-dividend date is one of the four key dates while evaluating dividends.
• If someone purchases a stock after its ex-dividend date, they are not entitled to collect dividends on that share for that year.
• The seller of the said stock will be receiving the dividend for that financial year instead of the buyer.
• Before the ex-dividend date of a stock, there may be a possibility of high buying pressure observed in the market.

The expected dividends of a share play a significant part in a long-term trader or investor analysis while buying a stock. If you have wondered what an ex-dividend share is, you have come to the right place.In this article, we will be learning more about ex-dividend shares and understanding the mechanics of an ex-dividend share. We will also be looking at the reasons to buy an ex-dividend share or sell one.

Let's start by answering the basic question, what is the ex-dividend date? The ex-dividend date is the date after which if a security is bought, the buyer will not be eligible to collect returns on the dividend that is collected.On the other hand, the seller of the ex-dividend share will still be eligible to collect the dividend sent by the company.

Now that we know what an ex-dividend date is, let's learn about the other important dates in the dividend calendar. Here are the dates that you need to know while looking at the dividend calendar:

• Declaration Date: This is the date when a company's board of directors gets together to announce the dividends that are going to be paid out to shareholders. This is the first step in the dividend payment process. The company will set the payment date, the ex-dividend date, and the record date during this period.
• Record Date: During this date, the company will evaluate which shareholders are eligible to receive dividends. The record date is usually one day after the ex-dividend date.
• Payment Date: As the name suggests,this is the date when the dividends are paid out to shareholders. The payout usually occurs weeks after the record date.
• Ex-Dividend Date: In the context of the dividend calendar, the ex-dividend date is usually two days after the record date. As mentioned above, it is the cut-off date after which a shareholder is not eligible to collect dividends from a company.

The ex-dividend date can have a significant impact on the price of a stock. Here are the ways a stock price usually behaves before and after the ex-dividend date:

• Before Ex-Dividend: Before the ex-dividend date, the price of a share is relatively high. The buying pressure around the share during this period is also high. This surge in buying pressure is caused because of the fact that the share will be paying dividends.

• After Ex-Dividend: However, after the ex-dividend date has passed, there is a chance that the price of the share will see a correction. This is because there will be no dividend that can be availed from holding the share.

Some traders may use this information as an arbitrage opportunity to perform dividend capture and earn profits. However, it is important to note that the price of the stock is not solely dependent on ex-dividend dates. Other factors like share market sentiments and fundamentals will also play a key role in determining the stock's price.

Understanding the ex-dividend date is essential for any dividend investor. By keeping track of upcoming ex-dividend dates through a reliable dividend calendar, you can make informed decisions about your investments.Remember, while timing around ex-dividend dates can be part of your strategy, it shouldn't be the only factor in investment decisions. Consider the company's overall financial health, dividend sustainability, and long-term investment goals. Also Read: The ABC of IPOs in India: A Beginner's Guide