Ex-Dividend Law and Legal Definition

Ex-dividend is a security that no longer carries the right to the most recently declared dividend. It can also refer to the period of time between the announcement of the dividend and the payment. A security becomes ex-dividend on the ex-dividend date set by the NASD. It is usually two business days before the record date set by the company issuing the dividend. For transactions during the ex-dividend period, the seller gets the dividend. Ex-dividend is usually indicated in newspapers with an x next to the stock or mutual fund's name. In general, a stock's price drops the day the ex-dividend period starts, since the buyer will not receive the benefit of the dividend payout till the next dividend date. As the stock gets closer to the next dividend date, the price may gradually rise in anticipation of the dividend.