Stock Ex-date

What is the stock ex-date? Why does it matter to investors? How to calculate ex-date? This article will answer these questions for you and share some practical tips to make you more confident in the stock market.

Definition of stock ex-date

Ex-Date or Ex-Dividend Date refers to a specific date in the stock market. If a listed company announces the simultaneous distribution of dividends and other non-cash benefits (such as bonus shares, bonus warrants, rights issues at a discount price) etc.), those who hold its stocks on the day before the ex-dividend date (i.e. shareholders) can enjoy all such rights and interests, while those who purchase the stock on or after the ex-dividend date cannot enjoy such rights and interests.

For example, if a company announces a cash dividend of 0.5 yuan per share on June 16, 2023, and its ex-date is June 1, 2023, then it can only be purchased on or before May 31, 2023 Only those who own the company's shares will receive this dividend, while those who bought the company's shares on or after June 1, 2023 will not receive this dividend.

The importance of stock ex-date

The ex-dividend date is of great significance to investors because it affects whether they can obtain the rights distributed by the listed company, thereby affecting their investment returns. Generally speaking, investors hope to receive profit distributions, so they will try to buy high-dividend stocks that meet their expectations before the ex-dividend date. Conversely, if investors want to sell a stock but don't want to miss out on the upcoming dividends, they need to do so on or after the ex-dividend date.

In addition, the ex-date date will also affect the price trend of the stock. In theory, the stock price of any stock will fall on the ex-dividend date because people who buy the stock on the ex-dividend date will not receive the rights. Therefore, in theory, the extent of the stock price drop on the ex-date date should be equal to the equity distributed. If the stock price falls by less than the rights distributed on the ex-dividend date, it means the stock's stock price rose on that day.

Calculation of stock ex-date

The ex-dividend date is not determined by the listed company itself, but is calculated by the exchange according to certain rules. Different exchanges may have different rules, but generally speaking, the ex-date date is calculated based on the closing date of transfer (Record Date). The transfer deadline refers to the day when a listed company stops handling transfer procedures. People who are not on the shareholder list after this day will not receive the distribution of rights and interests. Since stock transactions take a certain amount of time to complete settlement, the ex-date is usually a certain number of working days ahead of the book transfer deadline to ensure the rights of both buyers and sellers.

Taking the Hong Kong stock market as an example, since the Hong Kong stock market implements the "T+2" settlement system (i.e. settlement on the second working day after the trading day), the ex-dividend date is usually two working days earlier than the book closing date. For example, if a company's book closing date is June 16, 2023, its ex-date will be June 14, 2023. In other words, only those who bought the company's shares on or before June 13, 2023 can receive the rights, while those who bought the company's shares on or after June 14, 2023 cannot receive the rights.

Tips for stock ex-date

In addition to understanding the definition, importance and calculation method of net closing day, investors also need to pay attention to the following points:

The ex-dividend date of each listed company is different. Investors need to pay attention to the company's announcements and exchange information in a timely manner to avoid missing the opportunity to receive equity.

In addition to the net date, investors also need to pay attention to the payment date, which is the day when the benefits are actually received. Generally speaking, the distribution date will be within one month after the ex-date, but sometimes it can be as long as two or three months.

Buying and selling stocks around ex-dates can come with some strategies and risks. Some people will try "ex-dividend speculation", that is, buying stocks a few days before the ex-dividend date, so that they can receive the benefits quickly instead of waiting for a year, half a year, or three months.

But this approach is not necessarily profitable, because the stock price may fluctuate due to market factors, and transaction costs and taxes must be deducted.

When choosing stocks, investors should not only look at dividend yield, but also consider other factors, such as the company's performance, growth prospects, cash flow, distribution policy, etc. A high dividend yield does not necessarily mean a high return. It may also be due to problems in the company's business or a lack of market confidence in it.

Conclusion

The stock ex-date is an important concept that investors must master in the stock market. It determines whether investors can obtain the rights distributed by listed companies, thus affecting their investment returns. Investors need to pay attention to the ex-dividend dates and related announcements of each listed company in a timely manner, and based on their own goals and risk tolerance, before and after the ex-dividend date