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 record date is announced by the management of the company along with the amount of dividend, whereas, the dividend ex-date depends on the record date and is usually two days prior to the record date.
To understand these two terms, we have to understand what is dividends all about. Basically, the dividend is a part of the distribution of profit/earning in any organization and it is paid to its shareholders only and 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.
- Declaration Date: When the board of directors of the company announces or declares the payment of dividend which includes the size of the dividend, record date, or payment date.
- Ex-Dividend Date: Ex-Dividend date is more important to keep in mind to get the benefits of dividend benefits. This date is two days prior to 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 purchased shares today, you will receive the stock in your bank account after 2 business days, that is the date when your name as a shareholder would be listed in the books of the company.
- Record Date: 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, the investor would not be eligible for dividend benefits.
- Payment Date: The payment date is the date at which all eligible investors would get the amount of dividend to their accounts.
Dividends Ex-Date vs Record Date Infographics
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:
- The dividend ex-date depends on the record date, which is two days prior to the record date. The record date is announced by the management of the company along with the number of dividends.
- Dividend ex-date is much more important when it comes to buy or sell of that particular stock and it affects the dividend benefits from that stock. The record date is only a date, from which the management of the company 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.
Comparative Table
| Basis | Dividends Ex-Date | Record Date | ||
| Meaning | The ex-dividend date is set by the stock exchange. To get the dividend of a particular company, the stock should be bought by the investor by this date. | By this date, the name of the investor should be in the books of the company to get the dividend benefit of that company. | ||
| Announced by | Stock Exchange / 2 days prior to 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 | 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 Date | Date as Per the Example | Remarks | |||
| 1 | Declaration Date | April 20th, 2019 | Company A announced and Declare Dividend on this date. | |||
| 2 | Ex-Dividend Date | May 3rd, 2019 | You should purchase this particular stock on or before this date. It would be 2 days before the record date. | |||
| 3 | Record Date | May 5th, 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 5th, 2019 | An investor who has been listed in the books of the company on the record date will get dividend payments on this date. |
Conclusion
- The record date is announced by the board of directors 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 record date would be announced by the management of the company, but the ex-dividend date would be calculated by the stock exchange 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 by the management of the company. 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 Payout 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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