- Ex-Dividend Date: The ex-dividend date is the date that stock shares trade without the dividend. Shareholders who buy a stock on the ex-dividend date are not entitled to the next dividend payout. Since these shareholders miss out on one of the assets that make a stock valuable, the stock price drops by the amount of the quarterly dividend on the ex-dividend date. For example, a stock that pays a $1 annual dividend pays that dividend in four quarterly amounts of $0.25 each. If the stock's closing price the day before the ex-dividend date if $50 per share, that stock will be marked down to $49.75 at the next day's opening.
- Record Date: The record date is the date that your name needs to be on the company's books as a registered shareholder. The record date is set one business day after the ex-dividend date. So, to be officially recorded as a shareholder entitled to the next quarter's dividend, you must buy a stock two business days before the record date.
Why isn't the record date for a dividend at the same time as the ex-dividend date instead of the next business day?