If you have placed a Good Till Cancelled (GTC) limit order for a particular security, please note that your limit order price may be reduced if the security distributes dividends. The reduction typically happens on the dividend ex-date.
This is because when dividends are paid to shareholders, the company is no longer holding that cash. Therefore, the value of the company should drop by the amount of the dividend paid. Subsequently, any pending GTC limit orders for the particular security will also be reduced accordingly.
A customer placed a GTC limit order to purchase 100 units of Stock A at $50 per share. Stock A's market closing price was $55 on the day prior to the ex-dividend date.
Assuming Stock A pays a $1 quarterly dividend per share, on the ex-dividend date, the price of the stock falls by $1 as this amount now no longer belongs to the company.
Thus, the opening price of Stock A on the ex-dividend date is $54 ($55 - $1), assuming there is no other factor affecting the stock's price. The GTC limit order placed by the customer is also adjusted to $49 ($50 - $1).