Ex-dividend date
The ex-dividend date is the cut-off date from which a share trades without the right to a declared dividend, so its price typically drops by roughly the dividend amount that morning.
See it move
A company declares a €0.75 dividend while its stock closes at €40.00 the day before the ex-dividend date. Once shares go ex-dividend, that €0.75 is no longer attached, so the price opens around €40.00 − €0.75 = €39.25. The record date and payment date follow later, but entitlement is fixed at the ex-dividend cut-off.
The formula
Variables
- Expected opening price on the ex-dividend date (€ per share)
- Closing price the day before the ex-dividend date (cum-dividend) (€ per share)
- Dividend declared per share (€ per share)
Approximates the expected drop in a share's opening price on its ex-dividend date, assuming no other price movement.
Check yourself
A share closes at €58.00 the day before its ex-dividend date. The company has declared a dividend of €1.20 per share. Assuming the price adjusts purely for the dividend with no other price movement, what price would you expect the shares to open at on the ex-dividend date?