Explanation
To be eligible for an upcoming dividend, an investor must purchase the share before the ex-dividend date. The ex-dividend date is typically set two business days before the record date due to the T+2 settlement period in most markets.
Key Dates in Dividend Process:
- Declaration Date: When the company announces the dividend
- Ex-Dividend Date: The first day the stock trades without the dividend
- Record Date: When the company reviews its records to determine eligible shareholders
- Payment Date: When dividends are actually paid
Why the answer is A (ex-date):
- The ex-dividend date is the cutoff point for dividend eligibility
- To receive the dividend, you must purchase the stock on or before the trading day before the ex-dividend date
- If you buy on the ex-dividend date or later, you will NOT receive the dividend
Settlement Period Consideration:
Because stock transactions settle on T+2 basis (trade date plus 2 business days), the ex-dividend date is set two business days before the record date. This ensures that only shareholders who owned the stock before the ex-dividend date will be on the company's records on the record date.
Correct Answer: A (ex-date)
