Table of Contents
- What is the Record Date?
- How It Ties to the Ex-Dividend Date
- Understanding the Record Date in Depth
- Important Note
- Example of a Record Date
- Record Date vs. Ex-Dividend Date
- Will I Get a Dividend If I Buy on the Record Date?
- What If I Buy on or After the Ex-Dividend Date?
- What If I Sell on the Record Date?
- The Bottom Line
What is the Record Date?
Let me explain the record date, or date of record—it's the cutoff date a company sets to figure out which shareholders are officially on their books and eligible for an upcoming dividend.
When a company decides to pay a dividend, they use this record date to finalize the list of who gets it. If you're an investor, you need to understand this to make sure you don't miss out on those payments.
How It Ties to the Ex-Dividend Date
The record date works hand in hand with the ex-dividend date, which is when new buyers of the stock no longer qualify to be on that list by the record date. That's also the point where the stock starts trading without the dividend factored into its price—ex-dividend means 'without dividend,' after all.
Key Takeaways
- The record date is the cutoff for determining shareholders who get the declared dividend or distribution.
- You must buy the stock at least one business day before the ex-dividend date to be an official shareholder by the record date and receive the dividend.
- These dates are essential because stock ownership changes constantly, so a cutoff is needed for dividend payments.
- The ex-dividend date is when the stock trades without the dividend in its price.
Understanding the Record Date in Depth
You have to grasp the record date because it's linked to the ex-dividend date. Starting on the ex-dividend date, if you buy the stock, you won't get the next dividend—the seller will, on the payable date that follows.
Before trading dividend-paying stocks, know the company's record date and ex-dividend date. With the rules that kicked in May 2024 from the U.S. Securities and Exchange Commission, stock transactions settle in one day—T+1. So the ex-dividend date is now the record date itself if it's a business day, or one business day before if not.
This means if you buy at least one business day before the record date and it's a business day, your trade settles on the record date, putting you on the list for the dividend.
Different rules kick in for dividends that are 25% or more of the stock's value, which isn't common. Then, per the Financial Industry Regulatory Authority, the ex-dividend date is the first business day after the payable date. So you'd qualify if you buy at least a day before the payable date for those big payouts.
Important Note
To make sure you're in the records and get the dividend, buy the stock at least a full business day before the record date, or before the ex-dividend date if the record date isn't a business day.
Example of a Record Date
Suppose Company Alpha declares a $1 dividend payable on May 1 to shareholders of record as of April 10. That sets April 10 as the record date, and if it's a business day, that's also the ex-dividend date. If April 10 isn't a business day, the ex-dividend date is the last business day before it.
If you want Alpha's dividend, buy before the ex-dividend date. Say April 10 is a business day and you buy on April 9—your trade settles on April 10, so you're on record and get the dividend.
But if April 10 isn't a business day and April 9 is, then April 9 is the ex-dividend date. Buying on April 9 means settlement after April 10, so you'd miss the dividend.
Record Date vs. Ex-Dividend Date
Both the record date and ex-dividend date matter for dividend stocks. The record date is when the company lists who gets the dividend. The ex-dividend date is the first day new buyers don't qualify for it.
Will I Get a Dividend If I Buy on the Record Date?
No, you won't. To qualify, you need to be a shareholder on the record date, which means buying at least one day before.
What If I Buy on or After the Ex-Dividend Date?
If you buy then, you don't get the dividend—the seller does, as they're the one on record.
What If I Sell on the Record Date?
You're still entitled to the dividend if you sell on the record date, since the ex-dividend date passed and you're on the books.
The Bottom Line
The record date is when a company sets its list of shareholders for a dividend or distribution. You need to buy at least one day before the ex-dividend date to be on that list.
To collect a dividend, be on the books by the record date. In North America's T+1 system, that means buying at least a day before the record date.
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