The record date, or day of record, and the ex-dividend date of a stock are both important dates relating to stock purchasing and reporting. These dates help determine which investors will receive dividends and when they will receive them.
Companies use dividends to distribute profits to shareholders and may pay out dividends in several different ways, including cash dividends, stock dividends, or property dividends. Cash dividends are the most common type of disbursements and are typically sent to stockholders via check or direct deposit. Stock dividends are paid out in the form of company shares.
- The record date is set by the board of directors of a corporation and refers to the date by which investors must be on the company's books in order to receive a stock's dividend.
- An ex-dividend date is dictated by stock exchange rules and is usually set to be one business day before the record date.
- If the stock sale has not been completed by the ex-dividend date, then the seller on record is the one who receives the dividend for that stock.
The record date is the cut-off date used to determine which shareholders of a stock are entitled to a dividend. The record date is set by the board of directors of a corporation. Based on the record date, the board of directors can also determine who should receive stock reports and other financial information relating to the investment.
The ex-dividend date (or ex-date) of a stock is dictated by stock exchange rules and is usually set to be one business day before the record date. In order for an investor to receive a dividend payment on the listed payment date, they would need to have their stock purchase completed by the ex-dividend date. If the stock sale has not been completed by the ex-dividend date, then the seller on record is the one who receives the dividend for that stock.
For example, on April 2, company XYZ declares a dividend for holders of record on May 30. This means that the record date is set for May 30. The ex-dividend date would then typically fall two days prior, or May 28. If an investor or trader is not holding shares of XYZ by the end of the trading day on May 28, they would not be eligible to receive the dividend.
What The Experts Have to Say:
The Advisor Insight
Brandon Opre, CFP®
TrustTree Financial, Fort Lauderdale, FL
The legal definitions are pretty straightforward: the ex-dividend date is one day prior to the record date. So if you want the dividend, you need to be an owner the day before the ex-dividend date.
Many people use the term "trading ex," which means the time has already passed to get the dividend. If a stock is "trading ex," that means you can buy it but will not get the dividend for that current period. When a stock is trading ex, sometimes it is valued lower (hypothetically by the amount of the dividend) on the ex-dividend date.