Ex-Dividend
The cutoff date from which buying no longer earns you this dividend — the right to the dividend drops off, and the share price usually opens lower by roughly the dividend amount.
Ex-dividend date = the cutoff date from which buying no longer entitles you to the most recently declared dividend
The price drop on the ex-dividend date is a normal adjustment.
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 don't get this dividend — the first such day is the ex-dividend date.
On the ex-dividend date the price usually opens lower by about the dividend amount. With a $1 per-share dividend, the stock typically starts the morning roughly $1 lower. Cash is about to leave the company as a dividend, so the price adjusts by that much.
What it tells you
Going ex-dividend shows how the "right to the dividend" and the "share price" fit together. A price drop on the ex-dividend date isn't a loss — you soon receive that amount as a dividend in cash. Put the two together and it evens out.
If you're after the dividend, it tells you that you need to buy and hold before this cutoff (though since the price falls on the ex-date, "grab the dividend and sell right away" is no free lunch).
Formula
Ex-dividend date = the cutoff date from which buying no longer entitles you to the most recently declared dividend Opening price on the ex-dividend date ≈ previous close − dividend per share
What high or low means
The price drop on the ex-dividend date is a normal adjustment. Falling more or less than the dividend amount reflects other trading flows mixed in that day.
The more often and the more generously a stock pays dividends, the more clearly the ex-dividend effect shows up.
Thinking "buy before the ex-dividend date, take the dividend, sell right away, and come out ahead" is a trap. Since the price falls by roughly the dividend on the ex-date, the dividend received and the price drop largely offset each other. On top of that, dividends received are taxed.
The size of the drop on the ex-dividend date doesn't match the dividend exactly. The day's overall market moves and trading act on it too.
Going ex-dividend is an event tied to each stock's own dividend schedule. This term is background knowledge for understanding dividend investing.
Metrics to read alongside
Guides that cover this term
See it in real stocks
Search US stocks on Stocklore to see SEC-filing-based financial metrics alongside the sector benchmark.
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.