Date of Record

Definition

The date of record, also referred to as the record date, is a crucial financial date that determines which shareholders are eligible to receive a declared dividend. On this date, a corporation examines its list of stockholders to identify those who will be sent the dividend payment. Typically, the date of record is set two business days after the ex-dividend date.

Examples

Example 1: A corporation declares a dividend on January 10 and sets the ex-dividend date for January 15. The date of record would likely be January 17. Shareholders who are on the company’s books as of January 17 will receive the dividend.
Example 2: Company XYZ announces a dividend on July 1 and decides the ex-dividend date is July 8. The date of record might be set for July 10. Investors who purchase the stock before July 8 will be eligible for the dividend, while those who buy on or after July 8 will not. Only shareholders recorded by July 10 will receive the payment.

Frequently Asked Questions (FAQ)

Q1: Can a stockholder sell shares before the date of record and still receive the dividend?

A1: Yes, if a stockholder sells their shares after the ex-dividend date but before the date of record, they will still receive the dividend because they were the holder of record on the date of record.

Q2: Why is the date of record important for investors?

A2: The date of record is crucial for investors as it determines who will receive the dividend earnings. Understanding the relationship between the ex-dividend date and the date of record can influence timing decisions on buying or selling shares.

Q3: What happens if an investor buys shares on the ex-dividend date?

A3: If an investor buys shares on or after the ex-dividend date, they will not be eligible to receive the next dividend payment, as they will not be recorded as stockholders by the date of record.

Q4: Is the date of record the same for all corporations?

A4: No, the date of record can vary for different corporations and specific dividend declarations. Each company has the discretion to set its date of record.

Q5: How is the date of record communicated to stockholders?

A5: Corporations usually announce the date of record through press releases, official financial filings, and notifications to stock exchanges.

Ex-Dividend Date: The ex-dividend date is the cut-off date after which new buyers of the stock will not be entitled to the next dividend payment.
Dividend Yield: A financial ratio that shows how much a company pays out in dividends each year relative to its stock price.
Payable Date: The date on which a declared stock dividend is scheduled to be paid.
Dividend Declaration Date: The date on which a company’s board of directors announces a dividend distribution to shareholders.
Stockholder of Record: An investor who is documented as the owner of shares on the record date.

Online References

Suggested Books for Further Studies

“Dividends Still Don’t Lie: The Truth About Investing in Blue Chip Stocks and Winning in the Stock Market” by Kelley Wright.
“The Ultimate Dividend Playbook: Income, Insight and Independence for Today’s Investor” by Josh Peters.
“Common Stocks and Uncommon Profits” by Philip Fisher.

Fundamentals of Date of Record: Finance Basics Quiz

### What does the date of record determine for a corporation's shareholders? - [ ] The price at which future shares will be sold. - [x] Which shareholders are eligible to receive a declared dividend. - [ ] The date by which shareholders must sell their shares to receive dividends. - [ ] The stock split ratio for future actions. > **Explanation:** The date of record determines which shareholders are eligible to receive the declared dividend as it is based on the ownership records maintained by the corporation on that specific date. ### How many days after the ex-dividend date is the date of record typically set? - [x] Two business days - [ ] One business day - [ ] Five business days - [ ] Ten business days > **Explanation:** The date of record is typically set two business days after the ex-dividend date, allowing time for transactions to settle and accurate records to be maintained. ### If a shareholder sells their stock on the ex-dividend date, will they receive the dividend if they were on the record on the date of record? - [x] Yes, they will receive the dividend. - [ ] No, they will not receive the dividend. - [ ] Only if they notify the corporation. - [ ] Only if they repurchase the stock before the date of record. > **Explanation:** As long as the shareholder held the stock on the date of record, they are eligible to receive the dividend, even if they sell their shares on the ex-dividend date. ### Why is understanding the date of record important for investors? - [ ] To influence corporate voting rights. - [ ] To adjust stock option strategies. - [x] To make timely decisions on buying or selling shares relative to dividend entitlement. - [ ] To avoid paying capital gains tax. > **Explanation:** Understanding the date of record is important so investors can make timely decisions on buying or selling shares, ensuring they either receive the dividend or manage their cash flow accordingly. ### What happens if one buys shares one day before the ex-dividend date? - [ ] They will be excluded from the dividend payout. - [x] They will be eligible for the dividend payout. - [ ] They have to notify the corporation to receive the dividend. - [ ] They must hold the shares until the payable date to be eligible. > **Explanation:** Buying shares one day before the ex-dividend date makes the buyer eligible for the dividend payout, as they will be on the record by the date of record. ### Which term is closely related to the date of record for determining dividend eligibility? - [ ] Payable Date - [x] Ex-Dividend Date - [ ] Declaration Date - [ ] Stock Split > **Explanation:** The ex-dividend date is closely related to the date of record, as it is the date after which new buyers are not entitled to receive the next dividend. ### What is the primary function of the date of record? - [x] To identify stockholders eligible for dividend payments. - [ ] To set the price for dividend reinvestment plans. - [ ] To determine quarterly earnings reports. - [ ] To calculate stockholder voting power. > **Explanation:** The primary function of the date of record is to identify which stockholders are eligible for the dividend payments based on their holdings on that date. ### Who benefits from knowing the date of record? - [ ] Only the company's management. - [x] Both existing and potential investors. - [ ] Only the shareholders' legal representatives. - [ ] Neither investors nor management. > **Explanation:** Both existing and potential investors benefit from knowing the date of record as it helps them to plan their investments and understand when they will receive dividend payments. ### What action should a potential investor take to be recorded on the date of record? - [ ] Write to the corporation. - [ ] Purchase shares on the payable date. - [ ] Sell shares on the declaration date. - [x] Purchase shares before the ex-dividend date. > **Explanation:** A potential investor needs to purchase shares before the ex-dividend date to ensure that they are recorded on the date of record and qualify for the dividend. ### Which date is not set by the corporation? - [x] Purchase date - [ ] Ex-dividend date - [ ] Date of record - [ ] Payable date > **Explanation:** The purchase date is determined by the investors and is not set by the corporation. The corporation sets the ex-dividend date, date of record, and payable date.

Thank you for exploring the crucial aspects of the Date of Record in finance. Happy learning and investing!