Dividends Ex-Date Vs Record Date

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21 Aug, 2024

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Table Of Contents

What Is Dividends Ex-Date Vs Record Date?

The key difference between dividend ex-date and the record date is that dividend 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.

In contrast, the Record Date is the date decided by the top management, and it is the date on which the investor's name should be present in the company's books to get the dividend payment of particular security. However, it is equally important to understand the meaning of dividend in the entire process because both concepts originate due to dividend declaration by any company.

What Is Dividends Ex-Date Vs Record Date?

Dividends Ex-Date Vs Record Date Explained

The key difference between them is that the company's management 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, record date vs ex dividend date, we must understand what dividends are all about. The dividend is a part of the distribution of profit/earnings in any organization and 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 that any investor or shareholder should know before investing in any stock or any company or when holding any dividend-paying stock.

Declaration Date: When the board of directors of the company announces or declares the payment of a dividend, which includes the size of the dividend, record date, or payment date.
Ex-Dividend Date: The ex-dividend date is important to keep in mind to get the benefits of dividend benefits. This date is two days before the record date; a shareholder should purchase shares of that particular company on or before the ex-dividend date. In India, the stock settlement is on a T+2 basis, which means if you purchase shares today, you will receive the stock in your bank account after two business days. That is the date when your name as a shareholder is listed in the books of the company.
Record Date: The dividend record date is the date at which the investor has to be in the company’s books as an investor to get the benefits of the Dividend. Post this date, investors will not be eligible for dividend benefits.
Payment Date: The payment date is the date at which all eligible investors would get the dividend amount to their accounts.

Infographics

Below are the differences in infographics that make the entire topic of record date vs ex-dividend date easy to understand and remember.

Key Differences

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

The dividend ex-date depends on the record date two days before the record date. The record date is announced by the company's management, along with the number of dividends.
Dividend ex-date is much more important when buying or selling that particular stock, and it affects the dividend benefits from that stock. The record date is only a date from which the company's management would get to know the list of the shareholders who will receive the latest announced dividend.
On Dividend Ex-date, stock prices get adjusted downwards by the amount of dividend announced. But the stock price on record date won’t be affected by the amount of dividend announced by the management.

The above details give us a summary of all the key differences between the two topics. It is written in a concise form which is easy to interpret.

Comparative Table

The comparative table gives us the differentiation of , ex date and record date for dividend, based on certain criterias like meaning, importance, eligibility and announcing authority.

Basis	Dividends Ex-Date	Record Date
Meaning	The stock exchange 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, the investor's name should be in the company's books to get the company's dividend benefit.
Announced by	Stock Exchange / 2 days before the record date.	Board of Directors of the Company
Importance	More important as the stock has to be bought on or before this date.	Less important as compared to Ex-Dividend.
Eligibility criteria	Shares bought post-Ex-Dividend date are not eligible for dividend distribution.	Shares owned on or before the 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 that declared and announced a dividend on April 20^th, 2019, and the record date should be May 5^th, 2019, as decided by the company's management.

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

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

Thus, from the above example, we get clarity in reading the entire process. Some important points to note are given below:

The board of directors announces the record date. On or before, the shareholder must own the share of that particular company to receive the dividend payment. However, buying stock on the record date will not make you eligible for the company's dividend.
The most important date in the dividend situation is to be aware of the ex-dividend date. The company's management would announce the record date, but the stock exchange would calculate the ex-dividend date as it is affected by weekly or functional holidays as well. If there is no holiday, the ex-dividend date would be two days before the record date. The ex-dividend date is two days before the record day because it takes three days (T+2 settlement days) for a trade to settle in the stock exchange.
But the market is affected by several other factors also. On the ex-dividend date, the stock price of that particular stock gets adjusted downwards by the amount of the dividend announced. So sometimes, this downwards in pricing is also not visible on the ex-dividend date.
On the Record date and Dividend Payout dates, the exchange has no price adjustment due to a dividend.
These dates are business dates on which the stock exchange works, but not calendar dates.