Dividends Ex-Date vs Record Date

Difference Between Dividends Ex-Date and Record Date

The key difference between dividend ex-date and record date is that dividends ex-date is the date till which the investor has to complete his purchase of the underlying stock to get the eligible dividend on the date listed for dividend payment, whereas, Record date is the date decided by the top management and it is the date on which the investors name should be present in the books of the company to get the dividend payment of particular security.

The key difference between them is that the management of the company announces the record date along with the number of dividends. In contrast, the dividend ex-date depends on the record date and is usually two days before the record date.

To understand these two terms, we have to understand what is dividends all about. The dividend is a part of the distribution of profit/earning in any organization, and it is paid to its shareholders only. The amount of dividend declared has to be decided by the management at an annual general meeting of the company. There are four important dates which any investors or shareholder should know before investing in any stock or any company or when holding any dividend-paying stock.

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Dividends Ex-Date vs. Record Date Infographics

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Key Differences Between Dividend Ex-Date and Record Date

As we discussed earlier in this article, both dates are quite important when it comes to dividend payments to shareholders, but both have some differences between them. The main differences between these two dates are as follows:

Comparative Table

BasisDividends Ex-DateRecord Date
MeaningThe stock exchangeStock ExchangeStock exchange refers to a market that facilitates the buying and selling of listed securities such as public company stocks, exchange-traded funds, debt instruments, options, etc., as per the standard regulations and guidelines—for instance, NYSE and NASDAQ.read more set the ex-dividend date. To get the dividend of a particular company, the stock should be bought by the investor by this date;By this date, investor’s name should be in the books of the company to get the dividend benefit of that company.
Announced byStock Exchange / 2 days prior to the record date.Board of Directors of the Company
ImportanceMore important as the stock has to be bought on or before this date.Less important as compared to Ex-Dividend.
Eligibility criteriaShares bought post-Ex-Dividend date are not eligible for dividend distribution.Share owned on or before record date would be eligible for dividend distribution.

Example

Let’s understand the difference between these two important dates through an example.

Assume, there is one company called Company A declare and announce dividend on April 20th, 2019, and record date should be May 5th, 2019, as decided by the management of the company.

In this situation, we can understand all the dates as per the below table,

Sr.No.Type of DateDate as Per the ExampleRemarks
1Declaration DateApril 20th, 2019Company A announces and Declares Dividend on this date.
2Ex-Dividend DateMay 3rd, 2019You should purchase this particular stock on or before this date. It would be 2 days before the record date.
3Record DateMay 5th, 2019If you purchased this stock on or before the ex-dividend date, you would be eligible to get dividend benefits.
4Payment DateJune 5th, 2019An investor listed in the books of the company on the record date will get dividend payments on this date;

Conclusion

  • The board of directors announces the record date. On or before which, the shareholder must own the share of that particular company for being able to receive the dividend payment. However, buying stock on the record date will not make you eligible to get the company’s dividend.
  • The most important date in the dividend situation is to aware of the ex-dividend date. As the management of the company would announce the record date, but the stock exchange would calculate the ex-dividend date as it affects by weekly or functional holidays as well. If there is no holiday, then the ex-dividend date would be 2 days prior to the record date. The reason behind the ex-dividend date is 2 days prior to record day, is because it takes 3 days (T+2 settlement days) for a trade to settle in the stock exchange.
  • On the ex-dividend date, the stock price of that particular stock gets adjusted downwards by the amount of the dividend announced. But the market is affected by several other factors also. So some time this downwards in pricing are not visible on the ex-dividend date as well.
  • On the Record date and Dividend PayoutDividend PayoutThe dividend payout ratio is the ratio between the total amount of dividends paid (preferred and normal dividend) to the company's net income. Formula = Dividends/Net Incomeread more dates, there is no price adjustment by the exchange due to a dividend.
  • All these dates are business dates on which stock exchange works, but not calendar dates.

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