Record date vs ex-dividend date: Which one matters more?

Knowing the difference between the ex-dividend date and the record date is crucial information for dividend investors. Investors must keep their shares until a certain date to be eligible for a dividend payment, which differs from one company to another.

Dividend investing is one method individuals use to invest in the share market for long-term gain. This involves investing in businesses that consistently pay dividends and generate attractive returns.

There are two dates associated with the idea of dividends that most people find puzzling. The following article will discuss ex-date vs. record date to clarify doubts and help you make a profitable buy.

What is the record date?

The ownership of shares in a publicly traded corporation changes every day. It is challenging to precisely notify the investors of the dividend due to the frequent shifts in ownership of shares. In this scenario, the listed company sets a date, and all its stockholders on record are eligible for the dividend on that particular day.

Simply put, the record date is the day a business choose to pay the dividend. Since the number of people owning shares of publicly traded stock might change at any given moment, determining the record date is essential for keeping track of the corporation’s owners as of that particular day. 

For example, suppose a corporation announces that its record date is March 21. In that case, every shareholder whose names are included as of that date in the company’s records will be eligible to collect dividends. 

Also read: A guide to stock dividend

What is an ex-dividend date?

The ex-date, also known as the ex-dividend date, is the day on or after which a stock buyer loses their eligibility to receive dividend payments. 

Simply put, the ex-dividend date (ex-date) is the cut-off day you can own shares eligible for an ongoing dividend payment process. 

The ex-date takes place one business day prior to the record date. On the record date, shareholders who buy shares any day prior to the ex-date will be listed as owners of those units. This implies that they will be qualified for the dividend payout. 

However, on the record date, people who buy stocks on or after the ex-date will not be acknowledged as shareholders. Rather, the dividend payment will be sent to the seller, who will remain the record’s owner.

For instance, imagine a business declaring a dividend on April 3 with a record date of April 18. The ex-date comes one business day prior to the record date so it would be April 17. You will receive the dividend if you acquire the stock on or before April 16. However, if you buy the stock on or after April 17, you will not be entitled to receive the dividend.

Also read:Dividend Rate vs. Dividend Yield

Ex-date vs record date: Explained

Ex-date and record-date stock trading considerations

Investing in the stock market is mostly done for financial gain; for others, it may be a long-term strategy. If you trade equities around the ex-date and record dates, you should be aware that several things might impact the amount of your dividend, regardless of the reason.

Buying your stocks before the company’s ex-date is the best way to ensure you get your dividend in the current dividend cycle.

In the same way, you may buy stocks at any time, even beyond the ex-date, if you think the prices are excellent and it doesn’t matter whether you get the current cycle payout. 

Also read: What are interim dividends?

Conclusion

When paying out dividends on stocks, there are two crucial dates: the ex-date and the record date. Therefore, if you trade often, remember these dates and how they work to optimise your profits and maximise your rewards.