Loading the player...

What is the 'Record Date'

The record date is 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 exactly a company's shareholders are as of that date, since 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. Record date is also known as the date of record.

BREAKING DOWN '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 or her trade would only settle the day after the record date. He or she would therefore not be a shareholder of record for receiving the dividend.

Example of a Record Date

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 April 8-10 fall mid-week with no holidays.)

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.

A company’s record date is an important concept to understand before buying and selling dividend stocks. The exact definition of a record date may vary slightly between countries, such as between the London Stock Exchange (LSE) and the New York Stock Exchange (NYSE).

RELATED TERMS
  1. Ex-Dividend

    Ex-dividend is a classification in stock trading that indicates ...
  2. Declaration Date

    The declaration date is the date on which a company announces ...
  3. Payment Date

    The date on which a declared stock dividend is scheduled to be ...
  4. Unpaid Dividend

    A dividend that is owed to stockholders of record but has yet ...
  5. Trade Date

    A trade date is the month, day and year that an order is executed ...
  6. Ex-Date

    The date on or after which a security is traded without a previously ...
Related Articles
  1. Trading

    Understanding How Dividends Affect Option Prices

    Learn how the distribution of dividends on stocks impacts the price of call and put options, and understand how the ex-dividend date affects options.
  2. Investing

    Lowe's Stock Trades Ex-Dividend Monday

    Lowe's will send its dividend payment on May 10 to shareholders of record as of April 26.
  3. Investing

    Dividends Still Look Good After All These Years

    Find out how this "first love" still holds its bloom as it ages.
  4. Investing

    Target Date Funds: More Popular, Cheaper Than Ever

    How target date funds can help investors weather volatility when it comes to saving for retirement.
  5. Investing

    A Guide to Mutual Funds Trading Rules

    Make sure to review this guide on the dos and don'ts of mutual fund trading before you invest, including how trades are executed and which fees to look out for.
  6. Retirement

    The Unknown Dangers of Target Date Funds

    If they fit within your risk tolerance and have reasonable fees, target date funds can be an option.
  7. Investing

    State Street Stock Trades Ex-Dividend Thursday

    State Street will send its dividend payment on April 18 to shareholders of record as of April 3.
  8. Investing

    Why Dividends Matter

    Seven words that are music to investors' ears? "The dividend check is in the mail."
RELATED FAQS
  1. If a company moves its dividend record date forward, does the ex-dividend date change ...

    When a dividend is declared, there are three important dates for investors: the dividend payable date, the dividend date ... Read Answer >>
  2. What is the difference between record date and payable date?

    Learn how to ensure receiving stock dividends by the payment date on record and important dates to keep track of pertaining ... Read Answer >>
  3. Selling shares before the ex-dividend date

    Selling a stock before the ex-dividend date will most certainly affect whether or not you receive a dividend from the company. ... Read Answer >>
  4. If a long call is owned on the record date of a stock, is the owner of the option ...

    Learn how holding a long call option does not entitle the holder to a dividend on the underlying stock unless the call is ... Read Answer >>
Hot Definitions
  1. Cryptocurrency

    A digital or virtual currency that uses cryptography for security. A cryptocurrency is difficult to counterfeit because of ...
  2. Financial Industry Regulatory Authority - FINRA

    A regulatory body created after the merger of the National Association of Securities Dealers and the New York Stock Exchange's ...
  3. Initial Public Offering - IPO

    The first sale of stock by a private company to the public. IPOs are often issued by companies seeking the capital to expand ...
  4. Cost of Goods Sold - COGS

    Cost of goods sold (COGS) is the direct costs attributable to the production of the goods sold in a company.
  5. Profit and Loss Statement (P&L)

    A financial statement that summarizes the revenues, costs and expenses incurred during a specified period of time, usually ...
  6. Monte Carlo Simulation

    Monte Carlo simulations are used to model the probability of different outcomes in a process that cannot easily be predicted ...
Trading Center