Record Date

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DEFINITION of 'Record Date'

The cut-off date established by a company in order to determine which shareholders are eligible to receive a dividend or distribution. The determination of a record date is required to ascertain who the company's shareholders are as of that date, since the shareholders of an actively traded stock are continually changing. The shareholders of record as of the record date will be entitled to receive the dividend or distribution declared by the company. Also known as the date of record.

INVESTOPEDIA EXPLAINS 'Record Date'

The record date is important because of its relation to another key date, the ex-dividend date. On and after the ex-dividend date, a buyer of the stock will not receive the dividend as the seller is entitled to it.

The ex-dividend date is set exactly two business days before the dividend record date. This is because of the T+3 system of settlement presently used in North America, whereby stock trades settle three business days after the transaction is carried out. Thus, if an investor buys a stock two business days before its record date, his trade would only settle the day after the record date. He would therefore not be a shareholder of record for receiving the dividend. 

Consider an example. Assume company Alpha has declared a dividend of $1 payable on May 1, 2015 to shareholders of record as of April 10, 2015. The record date is therefore April 10, 2015 and the ex-dividend date is two business days before the record date, or April 8, 2015.

If Sam wishes to receive the dividend of $1 per Alpha share, she should buy the stock before its ex-dividend date. If she buys Alpha shares on April 7, her trade will settle on April 10; since she is a shareholder of record as of April 10, she will receive the dividend. But if she waits for a day and buys Alpha shares on April 8, which is the ex-dividend date, her trade will only settle on April 13 (as April 11 and April 12 are Saturday and Sunday respectively, three business days after April 8 is April 13). She would not receive the dividend in this case as she was not a shareholder of Alpha as of the April 10 record date.

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    Investors should pay attention to the ex-dividend date for a stock because it determines which stockholders qualify to receive ... Read Full Answer >>
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    The record date of a stock and the ex-dividend date are both important terms that relate to which investors receive dividends ... Read Full Answer >>
  5. If a company moves its dividend record date forward, does the ex-dividend date change ...

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  6. If I sell my shares before the ex-dividend date will I still get the dividend?

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