What is the ex-dividend date?
The ex-dividend date is a delicate date. This date determines the beneficiary of a dividend in the process of exchanging shares of the company. On this date and even after this date, the share is traded without its dividend.
If you buy a dividend-paying stock a day before the ex-dividend, you will still receive the dividend, but if you buy on the ex-dividend date, you will not get the dividend.
Conversely, if you wish to sell a stock while receiving a dividend that has been declared, you must sell on (or after) the ex-dividend day. Thus, the ex-dividend date is used to ensure that the dividend payment goes to the right people.
Here it is important to mention a word about the settlement date. This is the date on which the transaction is finalized. On this date, the buyer pays for the securities and becomes the official shareholder while the seller gives up his status as owner and recovers the money.
For stocks, the settlement date is the trade date plus three business days (called T+3). The seller has three business days after the trade date to deliver the shares to the buyer.
In short, investors need to understand the importance of dividend dates for their own benefit.