What is the Ex-Dividend Date?

Last Updated: 11 Aug 2025

Every investor enters the stock market with different goals. One may be a salaried person with a goal of multiplying a portion of the savings; one may be a person who just wants to invest for the long term and use the investments as a retirement fund; the rest are professional investors who rely on the stock market income to make a living.

The idea here is to invest in stocks of those companies that have a high demand for their products, stable business and most of all, offer regular dividends to their shareholders. Furthermore, they invest in numerous companies that offer dividends to create a regular source of income while creating a future fund based on the price appreciation of the stocks.

However, a lot goes on when a company decides to offer dividends. For example, if you decide to sell the whole or a portion of your holdings at some point, you won’t receive the same dividend as you were before.

There are some investors who invest in a company just before the company is about to announce a dividend, and then sell the shares as soon as they receive the dividend amount. This makes up for a quick profit-making opportunity. However, for all the investors who are investing to earn dividends, this blog will help you understand the jargon, and one of the most important among them is the ex-dividend date.

What are Dividends?

When you buy the shares of a firm, you essentially become the owner. It depends on the number of shares you own. As a shareholder, you will receive a portion of the profits of the company if the organisation decides to divide them among the shareholders. Cash dividends are the most common type. Here you receive the amount directly into your trading account.

The Ex-dividend Date

The ex-dividend date determines which shareholders will receive the announced dividend of the company on that specific date. It is the day when the stock of the company goes ex-dividend, meaning the stock from that day does not carry the value associated with its next dividend payment.

To understand the ex-dividend date, you must understand the four cycles of dividend announcement. Two are before the ex-dividend date, and one follows to offer shareholders dividends.

• Declaration Date: The declaration date is when the company announces it will be issuing a dividend in the coming months. Generally, the share price rises after such an announcement.
• Record Date: The date is associated with the company determining who the company’s shareholders are and who is eligible to receive the dividend.
• Ex-dividend date: The ex-dividend date is the date on which the company finalises the shareholders who will receive the dividend.
• Payable date: Also known as the payment date, it is when the shareholders receive their dividend amount.

Difference Between the Ex-Dividend Date and the Record Date

Understanding the dividend distribution process requires clarity on two essential dates: the ex-dividend date and the record date. Many investors ask: what is ex dividend date and record date, and how do they impact eligibility for receiving dividends?

Below is a comparison to make the distinction clearer:

Feature	Ex-Dividend Date	Record Date
Definition	The cut-off date is used to determine who is eligible for the dividend.	The official date when the company identifies shareholders eligible for dividends.
Also Known As	Ex-date	Book Closure Date
Stock Trading Impact	Stock trades ex-dividend on this day; buyers are not eligible for the dividend.	No trading impact, but used to finalise the list of shareholders.
Eligibility Criteria	You must own the stock before this date to receive the dividend.	You must be listed as a shareholder on this date.
Settlement Relevance	Takes T+2 settlement into account.	Based on settlement records maintained by the registrar.
Investor Action	Must buy the stock at least one day before the ex-dividend date.	Must be listed on the company’s records on this date.

So, what does ex-dividend date mean in practical terms? The date is a crucial period that determines whether someone is entitled to receive the dividend that is being paid out. When one buys a stock the day before the ex-dividend date, he is entitled to collect the dividend. But, if you purchase the stocks on or after the ex-dividend date, you won’t be eligible. This process is called stock trading ex-dividend.

As long as the sale occurs on or after the ex-dividend date, you can still pocket the dividend along with the sale proceeds. At the same time, the record date is the date on which the institution’s registrar compiles a list of shareholders eligible for the dividend.

According to SEBI’s T+2 settlement mechanism, investors should purchase the stock two business days before the ex-dividend date and three days prior to the record date to qualify.

Buying Shares: Before the Ex-dividend Date or After the Ex-dividend Date?

Suppose a company has announced that it will be paying dividends in the coming months. Your aim is to make profits based on the offered dividend amount. However, you realise that you missed the ex-dividend date and can no longer be eligible for the dividend amount. What can you do now?

If you have missed the ex-dividend date, there is not much that you have missed regarding the short-term profit. It is because the shares of a company decline by the value of the dividend offered by the company. For example, if the company’s share price was Rs 500, and it announced a Rs 30 dividend per share, its share price would decline by Rs 30 after the ex-dividend date. Now, you can realise the same profit as you would have with the dividend amount.

Impact of the Ex-Dividend Date on Share Prices

When a company says it will give a dividend, there’s an important date called the ex-dividend date. On this day, the stock price usually drops by the same amount as the dividend. So, if the company gives a ₹10 dividend, the stock price may fall by ₹10 on that day.

This drop happens for a reason. To get the dividend, you must buy the stock before the ex-dividend date. If the price didn’t fall, people could just buy the stock a day before, get the dividend, and sell it right after. That would be an easy way to make money without doing much. So, to keep things fair, the stock price drops to match the dividend amount. This way, there’s no extra benefit from just buying for the dividend.

Importance of the Ex-Dividend Date

It plays a vital role in the dividend announcement date cycle. For investors who build portfolios focused on income, it is very important to know what is ex dividend date. It decides the eligibility and also has an effect on the strategy of investment.

Understanding this date helps avoid common mistakes like buying a stock too late and missing the dividend. It also helps long-term investors decide when to sell without forfeiting dividend rights. Institutions also use the ex dividend meaning to manage tax planning, portfolio balancing, and even hedging strategies.

Practical Example of Ex-Dividend Date

Here’s a simple table to show how the dividend distribution process works:

Event	Date	Notes
Dividend Announcement Date	August 1	The company announces a ₹5 dividend
Record Date	August 14	The company finalises the list of eligible shareholders
Ex Dividend Date	August 13	Must own the stock before this date to receive dividends
Last Day to Buy	August 12	Buy the stock on or before this date to be eligible
Dividend Payment Date	August 25	Dividend is credited to eligible shareholders

So, if you buy the shares on August 12, you qualify. But if you buy on August 13, you won’t be eligible as the shares are trading ex-dividend.

Final Words

The ex-dividend date is a vital factor for investors who want to manage and adjust their holdings. Once you know the ex-dividend date, you make an investment strategy, buy shares of such companies, and sell them after you have received the dividend. However, this transaction needs a Demat and a trading account. You can open a free Demat and trading account by visiting the IIFL Capital Services website.

Frequently Asked Questions

Will I get a dividend if I buy on the ex-dividend date?

No, the shares are credited to the Demat account as per the T+2 policy; you will have to buy the shares at least two days before the ex-dividend date. Only then you will show on the shareholders’ list on the record date.

How soon after the ex-dividend date can I sell?

You can sell the very next day after the ex-dividend date. As you have already been added to the eligible shareholders, you will still receive the dividend.

What are the types of dates for dividend payment?

There are four types of dates for dividend payment: Declaration date, Record date, Ex-dividend date and Payable date.

Should I buy before or after the ex-dividend date?

The decision depends on your goals. Buy before the ex-dividend date to get the dividend because you need to own the stock by that date. Buy after the ex-dividend date for the possibility of lower share prices since the stock usually falls by the amount of the dividend. Take into consideration tax implications and your investment strategy when making your choice.