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What is record date?
Record date, also known as the date of record, is a cut-off date or a particular date fixed by the company to determine the eligibility of its shareholders. On this date, the investors must own the shares of the company so that they become eligible to participate in all company matters such as receiving the dividend, bonus, share spilt, etc.
What is ex-dividend date?
The ex-dividend date, also known as the ex-date is the first trading day, where the value of the next dividend payment is not included in the price of the stock. The buyers must purchase the stock before the ex-dividend date to receive the next dividend payment. If you buy the stocks on or after the ex-dividend date, then you are not entitled to the dividend payment.
Difference between the record date and the ex-dividend date
- The board of directors of the company decides the record date of a stock whereas the ex-dividend date is decided according to the stock exchange rules.
- The record date or the date of record comes after the ex-dividend date or ex-date. The ex-dividend date is generally one business day before the date of record.
- The record date is the date fixed by the company in order to determine the eligibility of the shareholders of the company. Buyers buying stocks on the day of record will not receive the next dividend payment of the company. They must buy stocks before the day of record to become eligible shareholders of the company. However, the ex-dividend date is the first day, when the trading of the stock begins. In order to receive the dividend payment, stocks should be bought before the ex-dividend date. Stock bought on and after the ex-day results into entitlement of dividend payment to the seller and not the buyer.
- The date of record is of not much significance to the investors. It is less important to the investors than the ex-dividend date. On the other hand, the ex-dividend date has greater importance for managing the portfolio.
- Shares that are owned on the date of record has the eligibility for getting distributions. However, shares that are purchased on or after the ex-dividend date are not eligible to get distributions.
- Remember that when dividends are issued, the price of the stock typically goes down by the amount of the dividend. This is a good article that explains the concept.
- Not all stocks issue dividends. For example, Google does not pay dividends despite being a major company with plenty of cash. You have to check any given stock to make sure it issues dividends in the first place.