Record Date
The record date, or date of record, is the cut-off date established by a company in order to determine which shareholders are eligible to receive a dividend or distribution. The determination of a record date is required to ascertain who exactly a company's shareholders are as of that date, since shareholders of an actively traded stock are continually changing. The shareholders of record as of the record date will be entitled to receive the dividend or distribution, declared by the company.
Record Date
Definition: The record date, also known as the registration date, is a cutoff date set by a company to determine which shareholders are eligible to receive dividends or distributions. The record date is established to identify the shareholders of the company on that specific date, as the shareholders of actively traded stocks are constantly changing. Shareholders who hold the stock as of the record date are entitled to receive the declared dividends or distributions.
Origin
The concept of the record date originated from the need for corporate governance and shareholder rights protection. As stock markets developed and trading became more frequent, companies needed a clear date to determine which shareholders were entitled to dividends or other distributions. This mechanism ensures fairness and transparency in shareholder rights.
Categories and Characteristics
The record date has the following key characteristics:
- Certainty: The record date provides a clear point in time for companies and shareholders to determine shareholder eligibility.
- Transparency: By announcing the record date, companies ensure that all shareholders are aware of and can adhere to this date.
- Fairness: The record date mechanism ensures that shareholders holding the stock on that date are fairly entitled to dividends or distributions.
Specific Cases
Case 1: A company announces that it will pay dividends on October 1, 2024, and sets September 15, 2024, as the record date. Only shareholders who hold the company's stock on September 15 will be eligible to receive the dividends.
Case 2: Another company plans to distribute stock dividends and sets November 1, 2024, as the record date. All shareholders holding the company's stock on November 1 will be entitled to receive the stock dividends.
Common Questions
Question 1: If I purchase stock after the record date, can I still receive the dividend?
Answer: No. Only shareholders who hold the stock on the record date are eligible to receive the dividend.
Question 2: What is the difference between the record date and the ex-dividend date?
Answer: The record date is the date to determine shareholder eligibility, while the ex-dividend date is the date when the dividend is deducted from the stock price. Typically, the ex-dividend date is one trading day after the record date.
