Expanded Definition

When companies announce a dividend, they declare the payment date, the amount of the dividend, and the date of record. In order to receive the dividend, one must be the official owner of the shares on or before the date of record. Given the daily fluctuation in a stock's ownership, there has to be a mechanism for easily deciding who gets the dividend. Because stock transfer transactions can take three days to finalize and record properly, the ex-dividend date falling two days prior to the record date allows a clear cut-off for recognizing dividend-payment status. If you buy the stock one day before the ex-dividend date (the "day before" being three days prior to the record date), you will get the upcoming dividend payment. If you buy on or after the ex-dividend date, you will not be considered the owner on the record date, and you will not receive the dividend, the seller will. Because of the delay in timing between when shares are purchased and when ownership officially transfers (the settlement date), the ex-dividend date is usually two business days before the date of record.