the record date is the cutoff established by a company to determine the shareholders eligible to receive a dividend or distribution this pivots from the ex dividend date when the stock started trading without the value of its next dividend payment 1
the record date is needed to decide the list of the company s shareholders since shareholders are constantly changing the shareholders of record on the record date are entitled to receive the company s dividend or distribution understanding the record datethe record date is essential because of its relation to another key date the ex dividend date on and after the ex dividend date buyers of the stock don t receive the dividend the sellers presuming they hadn t bought it in quick transactions after the record date receive it which occurs on the payable date the company s record date should be known before trading dividend paying stocks the ex dividend date is set precisely one business day before the record date in the u s 1 this is because of the t 2 system used in north america where stock trades are settled two business days after the transaction is carried out when an investor buys a stock one business day before its record date the trade settles the day after the record date and this person wouldn t be the shareholder of record for receiving the dividend different rules apply when the dividend is 25 or more of the stock value which is relatively rare the financial industry regulatory authority says the ex date is the first business day following the payable date 2 in other words you re entitled to dividends or distributions worth 25 or more of the share price if you buy the stock at least a day before the pay date to ensure you re in the record books you need to buy the stock at least two business days before the date of record or one day before the ex dividend date example of a record dateassume company alpha has declared a dividend of 1 payable on may 1 to shareholders of record as of april 10 the record date is therefore april 10 and the ex dividend date is one business day before the record date or april 9 if april 9 to 10 are in the middle of a typical week if investors want to receive the dividend from alpha they must buy the stock before its ex dividend date if they buy alpha shares on april 8 their trade will be settled on april 10 since they are a shareholder of record as of april 10 they will receive the dividend however if they buy alpha shares on april 9 the ex dividend date their trade will be settled on april 11 too late to receive the dividend record date vs ex dividend datethe record date and the ex dividend date are both pivotal for dividend paying stocks the record date is when the company determines the roster of shareholders who receive the dividend the ex dividend date set one trading day before the record date kicks off when new buyers no longer have the right to the payout 1if you want to be on the books as a shareholder of record in time to receive a dividend the latest you can buy is the day before the ex dividend date or two days before the record date will i get a dividend if i buy a stock on the record date no you wouldn t receive it to qualify for the dividend you need to be a shareholder of record on the record date this means buying your shares at least one day before the ex dividend date or two days before the record date 