Ex-dividend date and record date
The ex-dividend date is the first trading day on which a new buyer of a share does not get the dividend that has been declared. The record date is the day the company checks its list of shareholders to see who is paid. To receive the dividend, you must own the share before the ex-dividend date.
Record date
After the board declares a dividend, the company fixes a record date. Whoever is on the shareholder register on that day is entitled to the dividend. It is the company's cut-off for deciding who gets paid.
Ex-dividend date
Shares take time to settle, so the exchange sets an ex-dividend date to mark the first day a buyer will not be on the register in time. Buy on or after that day and you do not get this dividend. Buy before it and you do. With the current one-day settlement cycle, the ex-dividend date and the record date are normally the same day, but that follows the settlement cycle and can change.
What happens to the price
On the ex-dividend date the share price usually adjusts down by roughly the amount of the dividend, since that cash is leaving the company. So buying just before it to collect the dividend is not free money: the price adjusts and you hold the same value in a different form.
Why the dates matter
The dates tell you whether you will receive a declared dividend. They do not tell you whether the share is a good one to own. The dividend itself is paid some days after the record date.
Before and after the ex-dividend date (hypothetical numbers)
Suppose a company declares a dividend of ₹5 a share and the share closes at ₹250 the day before the ex-dividend date. If you hold 100 shares then, you will receive ₹500. On the ex-dividend date the price would usually be expected to open near ₹245. Someone who buys on that day pays about ₹245 and does not receive the ₹5.
Common questions
- What is the ex-dividend date?
- The first day on which a new buyer does not get the declared dividend.
- What is the record date?
- The day the company checks its register to see who is entitled to the dividend.
- Are the ex-dividend date and record date the same?
- Under the current one-day settlement cycle they are normally the same day, but that depends on the cycle and can change.
- Can I buy before the ex-dividend date just to collect the dividend?
- You would receive it, but the price usually adjusts down by about that amount on the ex-dividend date, so it is not free money.