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What Does Ex-Dividend Mean?
Written by The Content Team | Published on June 8, 2018
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Q: What does ex-dividend mean?
A: The ex-dividend date, or ex-date, tells investors if they're entitled to a security's next scheduled dividend1 payment or not. If you buy before the ex-date, you get the next dividend payout. Buy on or after the ex-date, and the next dividend payout stays with the seller.
When a stock "goes ex-dividend," it means the stock is trading without its next scheduled dividend. You'll often notice that once a stock goes ex-dividend, its stock price is reduced by roughly the amount of the dividend as compensation. (So if a security that pays a $1 dividend trades at $29 one day, it would often open trading at $28 on the ex-date since it no longer comes with that $1 dividend payout.)
How do you know when a stock has gone ex-dividend?
The ex-dividend date can found on a detailed quote. It's generally set one business day before the dividend's record date, which is the date you must be on a company's books as a shareholder in order to be eligible for any dividend.
Good to know...
- If an investor with a dividend reinvestment plan2 (DRIP) is aiming to sell his or her entire holding in a dividend-paying security, but sells on the ex-date or later, that investor will still be entitled to the next dividend. That means an investor with a DRIP could end up holding a few straggler securities of an investment he or she had intended to sell.
Find out more about dividends in Dividends, Dates and Terminology.
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1Dividends earned pursuant to DRIP may be subject to requirements imposed by the Income Tax Act (Canada). It is your responsibility to ensure that any associated tax requirements or obligations are satisfied.
2The list of DRIP eligible securities is subject to change at any time without prior notice. RBC Direct Investing will purchase whole shares only. Some exclusions may apply. Some eligible securities such as preferred shares and voting class common shares will not reinvest into additional units of the same security but rather the underlying non-voting common share or similar security.
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