Details
After the close on the day before the ex-dividend date and before the market opens on the ex-dividend date, all open good-until-canceled limit, stop, and stop limit orders are automatically reduced by the amount of the dividend, except for orders that the customer indicated "Do Not Reduce." This is done because the dividend payout will decrease the value of the company, as it comes directly from the company's reserves. At the market opening on the ex-dividend date, the stock will trade on an ex-distribution basis, adjusted for the amount of the dividend paid. If a corporation is distributing something other than a cash dividend, such as rights or warrants, then an ex-dividend date can be called an ex rights date, or ex warrants date, etc.
The key date for dividend-paying stocks, funds, or securities is the ex-dividend date. The Record Date, or Date of Record, determines the ex-dividend date, before which an investor must own the stock in order to receive the dividend. For the investor to receive the upcoming dividend the investor must purchase the stock prior to the ex-dividend date.
Read more about this topic: Ex-dividend Date
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