In a cash transaction, when is the ex-dividend date?

The ex-dividend date is established to determine which shareholders are entitled to receive a declared dividend. In a cash transaction, the ex-dividend date is set one business day before the record date. This is due to the standard T+2 settlement cycle for securities, meaning that trades settle two business days after the trade date.

On the record date, the company assesses its shareholders to determine who will receive the dividend. To be a shareholder on the record date, an investor must purchase the stock before the ex-dividend date; otherwise, the shares will not settle in time for the investor to be listed as a shareholder on the record date. Thus, this timing establishes that the ex-dividend date falls one business day prior to the record date, ensuring that investors who buy the stock the day before the ex-dividend date won’t receive the dividend.

As such, the correct understanding of the date structure confirms that the answer referencing the business day following the record date does not align with these established practices.