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What are ex-dividend shares?

Investment | Shares Helpful? 6

Asked by kane1926, submitted 08 June 2012.

Open Quote Hi, can you tell me what it means when it says on share information EX DIVIDEND?

Thank You
End Quote

Answered by Justin on 13 July 2012

Shares go 'ex-dividend' to stop investors from receiving up to a year's worth of dividend income by owning the shares for just a few days. For example, if they were to buy a share just before a dividend is paid and then sell it shortly afterwards.

When a company announces its dividend it also announces an ex-dividend date, dividends are only paid to whoever owned the shares before that date (typically a few months before the dividend is actually paid). As you'd expect, the price of the shares falls by around the amount of the dividend on the ex-dividend date as investors buying then won't receive the imminent dividend.

In practice this should make little difference when buying shares, although bear in mind when buying shares ex-dividend that you may have a long wait until you receive your first dividend (as the imminent dividend will be paid to the share's owner on the ex-dividend date).

Please note this answer does not constitute a recommendation or financial advice and should not be relied upon when making specific investment or other financial decisions. You should always undertake your own research into whether a product or service is appropriate for your needs and, if necessary, use a qualified professional adviser.

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