SIE Ready📣 Corporate Actions · Lesson 1 of 4 · 6 min
Four Dividend Dates and the One That Decides
📆 Buy a stock one business day too late and the dividend goes to the seller. Under T+1, that day is the record date itself.
💡 Key idea
Under T+1, the ex-date equals the record date for normal dividends. Buy regular way the business day before the ex-date to receive the dividend.
🧠 Why it matters
Four dates, in order: DECLARATION (the board announces the dividend), EX-DIVIDEND, RECORD (who is on the books gets paid) and PAYABLE. FINRA Rule 11140 sets the ex-date. For normal dividends (under 25% of the stock's value) the ex-date is the RECORD DATE, because regular-way trades settle T+1. A buyer on the ex-date settles after the record date, so the seller keeps the dividend; to get it, buy regular way no later than the business day before the ex-date. On the ex-date the price typically drops by about the dividend. Exceptions: for distributions of 25% or more, the ex-date is the first business day after the payable date; cash trades are excepted from the rule. Mutual funds set their own ex-dates. Mnemonic: Don't Ever Run Past (Declaration, Ex, Record, Payable).
📈 In the real world
💡 Sam, a fictional customer, sees a dividend with a record date of Thursday. He buys regular way on Wednesday; the trade settles Thursday and he is the owner of record. His friend buys Thursday, the ex-date, settles Friday and gets no dividend, but paid a price that had dropped by about the dividend.
📌 Takeaways
- Order of dates: declaration, ex, record, payable
- Normal dividends: ex-date = record date under T+1
- Distributions of 25%+: ex-date is the business day after payable
📖 Terms in this lesson
Ex-dividend date: The first day a stock trades without its upcoming dividend; under T+1 settlement it is the same business day as the record date.
Record date: The date the issuer checks its records to see who receives a dividend or distribution.
✅ Test yourself
Under current FINRA rules, a regular cash dividend has a record date of Tuesday. What is the ex-dividend date?
- Wednesday
- Tuesday
- The prior Friday
- Monday
Answer: B · Tuesday
With T+1 settlement, Rule 11140 sets the ex-date equal to the record date (a business day) for normal dividends. Monday was the ex-date logic of the old T+2 era, and Wednesday is after the record date.
What happens to a stock's price on the ex-dividend date, all else equal?
- It is halted until payment
- It is unchanged by rule
- It rises by about the dividend
- It drops by about the dividend
Answer: D · It drops by about the dividend
New buyers on the ex-date will not get the dividend, so the stock typically opens lower by about the dividend amount. There is no halt and no rule fixing the price.
Which correctly orders the dividend dates?
- Declaration, ex, record, payable
- Ex, declaration, record, payable
- Record, declaration, ex, payable
- Declaration, record, ex, payable
Answer: A · Declaration, ex, record, payable
Declaration comes first, then ex-date, record date and payable date (Don't Ever Run Past). Under T+1 the ex and record dates often fall on the same day, but ex is listed first.
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