Ex-Dividend
The cutoff date from which buying no longer earns this dividend — the right to the dividend drops off, and the price usually opens lower by the dividend amount.
In plain terms
When a company pays a dividend, it sets a cutoff for "how long you must hold the stock to receive it." Buy after that cutoff and you miss this dividend — that first day is the ex-dividend date.
On the ex-dividend date the price usually opens lower by the dividend amount. For a $1 per-share dividend, the price starts the ex-date down about $1. Since that cash is about to leave the company as a dividend, the price adjusts by that much.
What it tells you
Ex-dividend shows how "the right to a dividend" and "the share price" interlock. A price drop on the ex-date is not a loss — you receive that drop back soon as a dividend (cash). Combined, you break even.
It tells you that to capture a dividend you must buy and hold before this cutoff (though since the price drops on the ex-date, "grabbing the dividend and selling immediately" is no free lunch).
Formula
Ex-dividend date = the cutoff from which buying no longer earns the most recently declared dividend Opening price on the ex-date ≈ prior close − dividend per share
What high or low means
The price drop on the ex-date is a normal adjustment. Dropping more or less than the dividend is the result of other trading flows mixed in that day.
The more frequently and heavily a stock pays dividends, the more clearly the ex-dividend effect shows.
The idea that "buying before the ex-date, grabbing the dividend, and selling right away is profit" is a trap. Because the price falls by the dividend on the ex-date, the dividend income and the price drop largely cancel out. On top of that, dividends received are taxed.
The price drop on the ex-date does not exactly equal the dividend. The whole market's flow and trading that day act on it too.
Ex-dividend is an event tied to an individual stock's dividend schedule. This term is background knowledge for understanding dividend investing.
Metrics to read alongside
See it in real stocks
Search US stocks on Stocklore to see Ex-Dividend and other financial metrics alongside the sector average.
This explanation is for information and reference only and is not a recommendation to buy or sell any security. Investment decisions and their consequences are your own.