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Dividend record dates are critical to the distribution of dividends, as they determine who will get a payment when a company issues dividend checks. Everyone legally registered as a shareholder on the dividend record date gets a check, while people who are not, even if they own stock, will not receive payments. When companies prepare to issue dividends, they will release a calendar with the key dates, including the record date, ex-dividend date, and payment date.
The ex-dividend date is another important date in the time line. Everyone who buys stock on that date or after does not get a dividend. If a company plans to issue dividends on 15 April, it may make 15 March the ex-dividend date. Someone buying shares on 20 March does not get the dividend, because he made the purchase after the cutoff. This explains why new shareholders sometimes don't get dividends.
Dividend record dates refer to the date when the company will check its books to see who is registered as a shareholder, and how many shares each shareholder owns. From the time of purchase, it usually takes three days to complete a securities registration, during which time people own the stock but are not yet registered. For this reason, people usually need to plan on buying stock at least three days before the record date, to make sure they will be legally entitled to a share. The dividend record dates are usually one or two days before the ex-dividend date.
When people sell stocks around the time of a planned issue of dividends, they should be careful about the timing, depending on whether they want to retain their dividend rights or sell the shares before the dividend record dates. Buyers need to pay attention to dividend announcements to make sure they understand when to make stock purchases. Stock will be worth slightly more before dividend record dates, because people will be entitled to a dividend, and the value will drop afterward.
On the announcement date, when a company formally provides information about a planned dividend issue, company representatives will provide information about when the record, ex-dividend, and payment dates will fall. This allows investors to plan ahead. People with any doubts or concerns about whether the company's registration information is accurate should contact the company to check the records. If there are problems, it is important to correct them as soon as possible to make sure the dividend goes to the right person.
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