What does ex-dividend mean, and why does the price fall that morning?
A share goes ex-dividend on the first day it trades without the right to the next dividend. Hold it the day before and the payment is yours. Become a holder on the ex-dividend day or later and the person who sold to you keeps that one. On that morning the price usually opens lower by roughly the amount of the dividend, because the cash is on its way out of the company - which is why the ex-dividend date is not a way to collect a payment for nothing.
Which four dates does a dividend pass through?
A dividend has a small timetable, and only one of the dates decides who gets paid. The declaration date is when the board announces the payment and its size. The ex-dividend date is the first day the shares change hands without the right to it. The record date is when the company checks its share register to see who the holders are. The payment date is when the money actually lands, often four to eight weeks after the ex-dividend date.
The ex-dividend date is the one that matters to you, and it comes before the record date rather than after it. That ordering exists because share trades take a day or two to settle: to be on the register at the record date, the trade has to have happened early enough to complete. UK shares settle two business days after the trade, so the ex-dividend date sits one business day ahead of the record date. On the London market, dividends conventionally go ex on a Thursday with the record date the following day.
US-listed shares settle a day faster, which changes the shape of the timetable rather than the principle: with one-day settlement the ex-dividend date and the record date fall on the same day. If a UK and a US holding seem to follow different rules, this is usually why.
- DeclarationThe company announces it
- Ex-dividend — the dividing lineBought BEFORE today? The dividend is yours. Bought today or later? The seller keeps it.
- RecordThe register is checked
- PaymentThe cash arrives
The price usually opens lower by about the dividend: 500p becomes around 490p on a 10p payout.
Why does the share price fall on the ex-dividend day?
Because the company is about to part with cash it currently holds, and from that morning the right to that cash no longer travels with the share. A company that is about to hand out 10p a share is worth about 10p a share less than it was the evening before, so that is roughly where the price opens.
Roughly is the important word. The adjustment is not a rule the exchange enforces, it is just what the price tends to do, and everything else moving that day moves too. On a day when the wider market is up, a share can go ex-dividend and still close higher than it opened. The adjustment is still in there; it is simply mixed in with everything else.
This is what makes the idea of holding a share only long enough to collect a payment, sometimes called dividend capture, less rewarding than it sounds. The arithmetic is close to a wash before costs: you receive the dividend and hold shares worth about that much less. Dealing charges, the gap between the buying and selling price, and dividend tax outside an ISA all come off the top of a return that started at roughly nothing.
What happens between the ex-dividend date and the money arriving?
Very little that you need to do. Once the shares have gone ex-dividend, your entitlement to that payment is fixed. If the shares leave your account the following week, you are still paid: the question was only whether you held them before the ex-dividend date, not whether you still hold them when the money arrives.
The wait is usually several weeks, and the payment reaches you through your platform rather than from the company directly. It normally appears as cash in your account. If you have automatic reinvestment switched on, your platform uses that cash to add to the holding instead, which is a separate arrangement you choose rather than something the dividend does by itself.
A dividend that seems to have gone missing is most often one of three things: you became a holder on or after the ex-dividend date, the payment date has not arrived yet, or the holding is an accumulating fund that never pays cash out at all.
Is it different inside an ISA, or for funds?
The timetable is identical inside a Stocks and Shares ISA or a pension - the difference is tax, not mechanics. Dividends paid inside those wrappers are free of UK dividend tax. Held outside one, dividends have a tax-free allowance and then a rate that depends on your income tax band, and GOV.UK publishes the current figures.
Funds and investment trusts have ex-dividend dates too, often quarterly or monthly, and they work the same way. The one difference worth knowing is the share class. Income units, usually marked Inc or Dist, pay the money out to you. Accumulating units, marked Acc, keep it inside the fund and it shows up in the unit price instead, so there is no payment to wait for and nothing to reinvest.
That is why two versions of the same fund can look like different products on a screen. A tracker with Acc and Dist versions holds the same things; only the treatment of the income differs.
A worked example
Say a share closes at 500p the evening before it goes ex-dividend, and the declared dividend is 10p. The next morning it opens at around 490p. If you already held 200 shares, you now have shares worth about £980 and £20 on its way to you - about £1,000 either way, and the £20 arrives a few weeks later. If instead you became a holder that morning at 490p, you have not missed anything: you paid 490p for shares with no 10p attached, and the seller kept that payment. Either way the arithmetic works out; the ex-dividend date decides who is paid, not how much anyone ends up with.
Common questions
If the shares leave my account on the ex-dividend date, do I still get the dividend?
Yes. Entitlement is settled by whether you held the shares before the ex-dividend date. Once that morning has passed, the payment is yours even if the holding is gone long before the payment date arrives.
Does the price always drop by exactly the dividend?
No. Roughly, and only on average. Nothing forces the price to open at any particular level, and ordinary market movement on the day can be larger than the dividend - so on some days you cannot see the adjustment at all.
Why has a fund I hold never paid me a dividend?
It may be an accumulating share class, usually marked Acc, which keeps the income inside the fund and reflects it in the unit price rather than paying it out. The income is still there - it just never appears as cash in your account.
Where to next
- dividend shares for beginners
- the dividend reinvestment illustrator
- ISA rules
- the glossary
- tax on US shares inside an ISA
- what an index fund actually is
Where these figures come from
The rules and allowances on this page come from the official sources below. Tax rules change, so check the source for the current position.
- gov.uk: Tax on dividends the dividend allowance and the rates that apply outside a wrapper
- gov.uk: Individual Savings Accounts (ISAs) dividends paid inside an ISA are free of UK dividend tax
General information to help you understand investing, not advice about your situation. Figures are illustrative and the rules can change - always check gov.uk or your provider for the latest.
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Last reviewed 3 August 2026. We re-check the rules and figures on this page when they change.