The record date is the cutoff established by a company to determine the shareholders eligible to receive a dividend or distribution. This pivots from the ex-dividend date, when the stock started trading without the value of its next dividend payment.
Key Takeaways
The record date is the cutoff to determine which shareholders receive a corporate dividend.
The record date will usually be the trading day following the ex-dividend date, which is the trading date the dividend is no longer owed to new buyers of the stock.
To be eligible for the upcoming dividend, you must buy the stock at least two business days before the record date.
The record date is needed to decide the list of the company's shareholders since shareholders are constantly changing. The shareholders of record on the record date are entitled to receive the company's dividend or distribution.
Understanding the Record Date
The record date is essential because of its relation to another key date, the ex-dividend date. On and after the ex-dividend date, buyers of the stock don't receive the dividend; the sellers, presuming they hadn't bought it in quick transactions after the record date, receive it, which occurs on the payable date.
The company's record date should be known before trading dividend-paying stocks.The ex-dividend date is set precisely one business daybefore the record date in the U.S. This is because of the "T+2system" used in North America, where stock trades are settled two business days after the transaction is carried out. When an investor buys a stock one business daybefore its record date, the trade settles the day after the record date, and this person wouldn't be the shareholder of record for receiving the dividend.
Different rules apply when the dividend is 25% or more of the stock value, which is relatively rare. The Financial Industry Regulatory Authority says the ex-date is the first business day following the payable date. In other words, you're entitled to dividends or distributions worth 25% or more of the share price if you buy the stock at least a day before the pay date.
To ensure you're in the record books, you need to buy the stock at least two business days before the date of record or one day before the ex-dividend date.
Example of a Record Date
Assume company Alpha has declared a dividend of $1, payable on May 1, to shareholders of record as of April 10. The record date is, therefore, April 10, and the ex-dividend date is one business daybefore the record date, or April 9 (if April 9 to 10 are in the middle of a typical week).
If investors want to receive the dividend from Alpha, they must buy the stock before its ex-dividend date. If they buy Alpha shares on April 8, their trade will be settled on April 10; since they are a shareholder of record as of April 10, they will receive the dividend. However, if they buy Alpha shares on April 9, the ex-dividend date, their trade will be settled on April 11, too late to receive the dividend.
Record Date vs. Ex-Dividend Date
The record date and the ex-dividend date are both pivotal for dividend-paying stocks. The record date is when the company determines the roster of shareholders who receive the dividend. The ex-dividend date—set one trading day before the record date—kicks off when new buyers no longer have the right to the payout.
If you want to be on the books as a shareholder of record in time to receive a dividend, the latest you can buy is the day before the ex-dividend date or two days before the record date.
Will I Get a Dividend If I Buy a Stock on the Record Date?
No, you wouldn't receive it. To qualify for the dividend, you need to be a shareholder of record on the record date. This means buying your shares at least one day before the ex-dividend date or two days before the record date.
What Happens If I Buy Shares on or After the Ex-Dividend Date?
If you buy a stock after its ex-dividend date, which in U.S. markets is the day before the date of record, you will not be entitled to the dividend. Instead, the seller receives the dividend since they were the shareholder of record on the record date.
What Happens If I Sell a Stock on the Record Date?
You are still entitled to the dividend if you sell a stock on its record date. Since the ex-date has already passed, it's the seller, not the buyer, who's on the books as the shareholder on the record date.
The Bottom Line
The record date, also known as the date of record, is when a company offering a dividend or distribution establishes its list of shareholders who will receive the payout. The record date generally occurs a day after the ex-dividend date, the first trading day when new buyers no longer qualify for the dividend.
You must be on the books as a shareholder on the record date to collect a dividend. For North America's T+2 settlement system, this means buying at least two days before the record date.
The record date, also known as the date of record, is when a company offering a dividend or distribution establishes its list of shareholders who will receive the payout. The record date generally occurs a day after the ex-dividend date, the first trading day when new buyers no longer qualify for the dividend.
The date of record is the day on which the company checks its records to identify shareholders of the company. An investor must be listed on that date to be eligible for a dividend payout. The date of payment is the day the company mails out the dividend to all holders of record.
The record date for rights issue is the cut-off date as on which a company takes out a list of existing shareholders holding the stock of the company to determine the eligible shareholders for the rights issue. The right issue record date is announced well in advance by the company through the Letter of Offer.
In such a scenario, the listed company fixes a date, and all the on-record company's shareholders are eligible for the dividend on that particular date. The date the company fixes to pay the dividend is the record date. Many companies also refer to it as the date of the record.
The declaration date is when a company states its plans to issue a dividend. The record date is when the company determines which shareholders are entitled to a dividend. The ex-dividend date is usually the day before the record date. The payment date is the day when dividend payments are made.
If investors want to receive the dividend from Alpha, they must buy the stock before its ex-dividend date. If they buy Alpha shares on April 8, their trade will be settled on April 10; since they are a shareholder of record as of April 10, they will receive the dividend.
The record date is set by the board of directors of a company and refers to the date by which investors must be on the company's books in order to receive a stock's dividend. A stock's price usually drops by the amount of the declared dividend on the ex-dividend date.
The date on which a shareholder must be registered as the owner of shares in order to receive a dividend or other entitlement. Also, in the context of a rights issue, the reference date for entitlement to nil paid rights.
The ex-dividend date for stocks is usually set one business day before the record date. If you purchase a stock on its ex-dividend date or after, you will not receive the next dividend payment. Instead, the seller gets the dividend. If you purchase before the ex-dividend date, you get the dividend.
The ex-dividend date is the first day the stock trades without its dividend, thus ex-dividend. If you want to get the dividend payment, you need to own the stock by this day. That means you have to buy before the end of the day before the ex-dividend date to get the next dividend. In other words, it's the cut-off date.
Can you sell on the record date and still get the dividend? Yes, you can sell anytime on or after the ex-dividend date and still be eligible for the dividend. All investors who owned stock by the end of the trading session the day before the ex-dividend date will receive the payout.
The record date is the date the company determines who are shareholders who receive dividends. (The ex-dividend date is before the record date to allow transactions of the trade to settle before the record date.) For example, suppose a stock trading for $50 per share declares a $0.50 dividend.
When it comes to investing for dividends, there are three key dates that everyone should memorize. The three dates are the date of declaration, date of record, and date of payment.
If the shares are sold on the ex-date/record date, they will be debited from the demat account on the next day, i.e., T+1 day, and not on the same day.
Use the ex-dividend date (and record date) as an investing strategy to get the most dividend returns. Knowing your ex-dividend date, and record date, will help you get full value from your dividends, but trying to make a quick buck buying and selling around key dividend dates is not worth the risk.
Dividend capture specifically calls for buying a stock just prior to the ex-dividend date in order to receive the dividend, then selling it immediately after the dividend is paid. The purpose of the two trades is simply to receive the dividend, as opposed to investing for the longer term.
Conversely, the record date for the dividend serves as a cutoff point for determining dividend entitlement. Shareholders listed in the company's records as of the record date are entitled to receive dividends, reflecting their ownership status at that moment.
Use the ex-dividend date (and record date) as an investing strategy to get the most dividend returns. Knowing your ex-dividend date, and record date, will help you get full value from your dividends, but trying to make a quick buck buying and selling around key dividend dates is not worth the risk.
For example, the payment date is when the dividend is received, the ex-dividend date is the last date an investor must hold a share to be eligible for a dividend, and the record date is the date by which a shareholder must be registered with the company.
Bonus shares are usually announced by the company with a record date, the date which is considered for the bonus shares. All the investors holding the shares on the record date are eligible for bonus shares. Company usually gives bonus shares as a substitute of dividend payouts.
Introduction: My name is Francesca Jacobs Ret, I am a innocent, super, beautiful, charming, lucky, gentle, clever person who loves writing and wants to share my knowledge and understanding with you.
We notice you're using an ad blocker
Without advertising income, we can't keep making this site awesome for you.
:max_bytes(150000):strip_icc()/recorddate.asp-final-6a2177f6c0da42279a202b6b30a17d52.png "What Is the Record Date and Why Is It Important? Plus an Example (1)")
