Record Date

What Is the Record Date?

The record date, or date of record, is the cut-off date laid out by a company to figure out which shareholders are eligible to receive a dividend or distribution. The determination of a record date is required to find out who exactly a company's shareholders are as of that date, since shareholders of an actively traded stock are persistently evolving. The shareholders of record as of the record date will be qualified for receive the dividend or distribution, declared by the company.

Understanding Record Date

The record date is important as a result of its connection to another key date, the ex-dividend date. On and after the ex-dividend date, a buyer of the stock won't receive the dividend as the seller is qualified for it. A company's record date is a key concept to comprehend before buying and selling dividend stocks. The exact definition of a record date might differ somewhat between countries, for example, between the London Stock Exchange (LSE) and the New York Stock Exchange (NYSE).

The ex-dividend date is set exactly one business day before the dividend record date. This is a result of the T+2 arrangement of settlement as of now utilized in North America, by which stock trades settle two business days after the transaction is carried out. In this manner, on the off chance that an investor buys a stock one business day before its record date, their trade would just settle the day after the record date. They would subsequently not be a shareholder of record for getting the dividend.

Prominently, various rules apply assuming the dividend is 25% or greater of the value of the security, which is very rare. In this case, the Financial Industry Regulatory Authority (FINRA) shows that the ex-date is the main business day following the payable date.

To guarantee that you are in the record books, you want to buy the stock something like two business days before the date of record, or one day before the ex-dividend date.

Example of a Record Date

Expect company Alpha has declared a dividend of $1, payable on May 1, to shareholders of record as of April 10. The record date is hence April 10 and the ex-dividend date is one business day before the record date, or April 9 (if April 9-10 fall mid-week without any occasions).

Assuming that Sam wishes to receive the dividend of $1 per Alpha share, they ought to buy the stock before its ex-dividend date. In the event that they buy Alpha shares on April 8, their trade will settle on April 10; since they are a shareholder of record as of April 10, they will receive the dividend. Be that as it may, on the off chance that they hang tight for a day and buy Alpha shares on April 9, which is the ex-dividend date, their trade will just settle on April 11. They wouldn't receive the dividend in that frame of mind as they were not a shareholder of Alpha as of the April 10 record date.

Features

• The record date is the cut-off date used to figure out which shareholders are qualified for a corporate dividend.
• To be eligible for the dividend, you must buy the stock no less than two business days before the record date.
• The record date will for the most part be the day following the ex-dividend date, which is the trading date on (and later) which the dividend isn't owed to another buyer of the stock.