Ex-dividend is a term that seems to have a lot of people I speak with confused. Many people I talk with on a pretty regular basis think it means the date that the dividends are paid out to shareholders of the company. This is not correct.
The easiest way for me to explain ex-dividend is simply to refer people to this submission over at wikipedia.
In essence, the ex-dividend date is 2 days prior to the record date – with the record date being the date that shareholders must be on “record” in order to receive the dividend. It is used because of the 3 days of settlement for stock trades.
For someone who does not trade a lot (like me), I could usually care less about the ex-dividend date. But for those of you who trade, it can be important to know as often a stock sees a run-up in price prior to a dividend payment.Google+
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