Record Date

Deciphering Record Dates: Understanding Shareholder Entitlement

What Exactly is the Record Date?

The record date, also known as the date of record, is a crucial marker set by a company to determine which shareholders are eligible to receive dividends or distributions. This date is essential as it identifies the shareholders entitled to these benefits, amidst the dynamic nature of stock ownership.

Key Points to Remember

The record date serves as the cut-off point for determining dividend eligibility.
Typically, it follows the ex-dividend date, which marks when new buyers of the stock are not entitled to the upcoming dividend.
Investors must purchase the stock at least two business days before the record date to qualify for the dividend.

Understanding the Significance of Record Dates

The record date is intrinsically linked to the ex-dividend date, a vital aspect of dividend stock trading. Understanding this relationship is crucial for investors navigating the stock market, although nuances may exist across different stock exchanges globally.

The ex-dividend date, falling one business day before the record date, plays a pivotal role in dividend stock transactions, especially under the T+2 settlement system observed in North America. This system stipulates that stock trades settle two business days post-transaction, influencing dividend entitlement.

In rare cases where the dividend exceeds 25% of the security's value, distinct rules apply. In such instances, the ex-date shifts to the first business day following the payable date, as per guidelines by the Financial Industry Regulatory Authority (FINRA).

Ensuring Eligibility: A Practical Example