The ex-dividend date, also known as the reinvestment date, is an investment term involving the timing of payment of dividends on stocks of corporations, income trusts, and other financial holdings, both publicly and privately held. For sales before this date, the buyer is entitled to the dividend; for sales on or after the date, it belongs to the seller.
The ex-dividend date is two business days prior to the record date. To be a stockholder on the record date an investor must purchase the stock before the ex-dividend date. The latest date he can buy the stock to be a stockholder on record and be entitled to the dividend would be one day prior to the ex-dividend date (this includes extended hours (pre-market and after-hours) of that day) to allow for the three stock trading day settlement of the stock purchase. If the investor purchases the stock the day before the ex-dividend date the investor would be a stockholder on the record date and would be entitled to receive the dividend payment.
In the United States, the Securities and Exchange Commission stipulates that there are three days of settlement for stock trades. The ex-dividend date is normally two business days (3 minus 1) before the record date. For the purpose of calculating an ex-dividend date, business days are days on which both the major stock exchanges and the banks in New York State are open. Thus Columbus Day and Veterans Day are trading days, but not business days for calculating an ex-dividend date, since they are legal holidays and banks are not open.