If a corporation declares a 5% stock dividend payable on October 18, what is the ex-date for this distribution?

To determine the ex-date for a 5% stock dividend, it is essential to understand how dividends operate in relation to stock trading and settlement dates. The ex-date is the date on which the stock begins trading without the entitlement to the declared dividend.

For stock dividends, the ex-date is typically set one business day before the record date. The record date is the deadline for the company to identify the shareholders who are entitled to receive the dividend. Since the stock dividend is declared payable on October 18, it is common practice for the record date to fall soon after the declaration, likely on the day of the distribution or within a few days following.

In the given scenario, if we assume a business day structure, and October 18 is the payment date, the record date might likely be on October 18 or just after, depending on the company’s announcement. Therefore, if the record date is October 18, the ex-date would generally be October 17. However, since it is necessary to apply the typical T+2 (transaction date plus two days) settlement cycle, we would go back to find an appropriate ex-date.

Calculating backward implies that if we consider October 18 to be the record date, we would consider