A keen understanding of the various market terms is necessary to invest in the share market. A key factor that can affect your investment is the ex-dividend date. If you've ever wondered what ex-dividend date is and how to define ex-dividend date, you've come to the right place. In this article, we will look into what is the meaning of ex-date for dividends, exploring what ex-date for dividend means in detail and discussing their impact on share prices in India.
To define ex-dividend date, it's the day when shareholders determine their eligibility for dividend payments from a company. At this point, a stock goes "ex-dividend," meaning it has no further dividend value. If you buy the stock after the ex-dividend date, you won't get the next dividend.
What Is an Ex-Dividend Date In India?
Ex-dividend date meaning - An ex-dividend date means the specific date on which shareholders are eligible to receive the company's dividend. This is the date when a company's stock goes ex-dividend, meaning that it carries no dividend value after that day.
If a stock goes ex-dividend, investors who purchase the stock on or after the ex-dividend date won't receive the next dividend payment. Moreover, ex-dividend dates are typically set two business days before record dates. In the case of the record date being February 18th, the ex-dividend date would be February 16th.
Also, for investors, it is important to understand what is ex-dividend date in India because it determines when shareholders will receive the dividend payment. Nevertheless, in order to fully understand what is the meaning of ex-date for dividend, it must be understood in conjunction with other related dates.
Table of Content
Understanding Ex-Dividend Date Meaning
Ex-date for dividend means the date for dividend payments to shareholders. In order to better understand what is the ex-date in the dividend, let's run through the four cycles.
This is when the company announces dividends will be paid to shareholders over the next few months. After this announcement, the share price usually goes up.
This is the date when the company determines which shareholders get the dividend. Then they create a list of those who'll get paid.
To define ex-dividend date, it's when the company finalise the list of shareholders who'll get a dividend. Additionally, it is necessary to own the company's stock at least one full business day before this date in order to qualify.
The dividend payment date is when the dividend amount is actually distributed to shareholders.
Ex-dividend dates are generally two days before record dates. The dividend payment will only be made to shareholders who own the company's stock before the record date. Usually, the stock price decreases by the amount of the dividend when the ex-dividend date comes. It occurs because the company has less money left as profits after announcing the dividend, which is reflected in their accounting books. As a result, the stock price decreases by the dividend value.
The Impact Of The Ex-Dividend Date On Share Prices
After understanding what is ex-dividend date in India let’s explore its impact on the share price. So, if investors want to get their next dividend payment, they have to buy shares by the ex-dividend date. Therefore, the days leading up to the ex-dividend date are crucial for them.
A stock's price typically rises proportionally during this period, as it carries the dividend value. It happens because when an organisation declares dividends on its stock, its demand in the open market increases, causing its price to surge. This growth depends on the rate at which an organisation announces dividends. If dividends are small, price fluctuation will be in sync with dividends. As an example, if a company declares a 20% dividend, its stock market price rises by 20%, too.
However, on the ex-date, the price of these stocks drops in proportion to the dividend. That's because a stock loses its dividend value. Afterwards, such stocks trade ex-dividend, which means they have no dividend value.
Understanding what is the ex-date in the dividend and its implications is essential for investors in the Indian stock market. It's the date a stock loses its dividend value when shareholders are eligible to receive a dividend payment from a company. A company usually sets the ex-dividend date two business days before the record date, which is when it determines who's eligible for dividends. For dividend payments, investors need to own the company's stock at least one full business day before the ex-dividend date.
Furthermore, an online app like blinkX stock trading app can help you navigate the share market and maximise your investment potential. This platform gives real-time info, so you can make informed decisions. With an understanding of the ex-dividend date meaning and its impact on share prices, you can maximise returns.
Frequently Asked Questions
Yes. Usually, after the ex-dividend date, the share price drops by the dividend amount.
There are three key dates to remember when investing for dividends. Those are the dates of declaration, record, and payment.
The record date is when you should be registered on the company's list in order to receive dividends, and the ex-date is when you'll no longer be eligible.
If you buy shares on or after the ex-dividend date, you won't get a dividend.
For stock dividends, you must buy the stock (or own it already) two days before the record date and own the shares at the close of trading one day before the ex-date.
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