What Is XD?
Let me break down what XD means for you as an investor. XD is a symbol that indicates a security is trading ex-dividend. It's essentially an alphabetic qualifier that provides key information about a specific security in a stock quote. In some cases, just an X is used to show the stock is ex-dividend.
These qualifiers can differ based on where the stock is quoted, since various news and market data services might use their own versions. You'll see these symbol letters on a broker's trading platform, in charting programs, or in published reports.
Key Takeaways
- XD appears as a footnote, subscript, superscript, or suffix to a ticker symbol to signify the stock is ex-dividend.
- Stocks trading right after the dividend distribution often drop in price by the amount of the cash dividend payout.
- XD is one of several qualifiers or suffixes attached to ticker symbols to denote a stock's status or related events.
Understanding XD
A dividend is simply a portion of a company's earnings distributed to its shareholders. When a stock trades ex-dividend, the current shareholder has already received the recent dividend, and if you buy the stock now, you won't get that payment. As a result, the stock's price is likely to be lower.
There are multiple qualifiers tied to dividends. For instance, a -j suffix means the stock paid a dividend earlier in the year but doesn't currently offer one.
Comparing XD With the Record Date
To figure out who gets a dividend, you need to pay attention to two key dates: the ex-date (or XD) and the record date.
You must be listed on the company's books as a shareholder to receive a dividend. Once the record date is set, the ex-dividend date follows, usually one business day before it. If you buy shares before the ex-dividend date, you'll get the dividend; if you buy on or after, the seller gets it.
Companies also use the record date to decide who receives financial reports, proxy statements, and other important information.
Special Rules for Determining XD
Special rules kick in if a dividend is 25% or more of the stock's value. In that case, the ex-dividend date is deferred to one business day after the dividend is paid.
Companies sometimes pay dividends in stock rather than cash, like additional shares or shares in a spun-off subsidiary. For stock dividends, the ex-date is set on the first business day after the dividend is paid, which is also after the record date.
If you sell before the ex-dividend date, you're obligated to deliver any shares from the dividend to the buyer, since you'll only get an I.O.U. from your broker for those extra shares.
According to the SEC, the day you can sell without that obligation isn't the first business day after the record date, but typically the first business day after the stock dividend is paid.
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