Whether you are a new or an experienced investor, investing in dividend stocks is an attractive option that offers long-term growth along with a steady flow of income. Under this investment strategy, you invest in companies that consistently generate profits and distribute them in the form of stock dividends to shareholders.
However, while dealing with dividends, you may need clarification about the ex-date vs record date of dividends. Understanding the various aspects of these two crucial dates will help you deal with dividends seamlessly.
What is an Ex-Date?
An ex-date, also known as an ex-dividend date, is the date on or after which you become ineligible to receive the upcoming dividend.
If you buy a share of a company’s stock, it could take around 2 days for the shares to be credited to your demat account. Therefore, if you want to avail the dividends of a company’s stocks, you must buy the shares before the ex-date.
What is a Record Date?
A record date refers to the specific date set by a listed company on the stock market to determine the shareholders that are eligible to receive dividends. Given the frequent fluctuations in the ownership of shares, a record date helps in establishing a certain date to ensure the accurate distribution of dividends to the rightful shareholders.
Hence, if you are officially registered as the company’s shareholder by the record date, you are eligible to receive the dividend payout at the end of the trading period.
The Purpose of Understanding Ex-Date vs Record Date
Understanding the roles of significant dividend dates, like record dividend date vs ex-dividend date, is very important for your investment journey.
The record date signifies the deadline by which you must be registered on the company’s dividend list. Ex-date, on the other hand, is the date from which you become ineligible to receive the company dividend.
By understanding the purpose of dividend date vs ex-dividend date vs record date, you can effectively plan your investment strategy and maximize your investment returns. If you ensure timely registration before the record date, it will secure your entitled dividend.
Ex-Div Date vs Record Date: How Does it Affect You?
As mentioned earlier, ex-date and record date are significant if you plan on profiting from the dividends of shares you buy.
Let’s make it easy with an example:
Suppose a company called XYZ announces its dividends on the 1st of June 2024. The record date listed is the 8th of October, 2024. Since the ex-date is usually set two days before the record date, let’s assume it is the 4th of October, 2024.
If you want to be eligible for the announced dividend, you must be officially registered as a shareholder by the record date, the 8th of October 2024. This typically requires you to buy shares before the 2nd of October to be eligible for dividends. This is because the ownership can take around two days to be credited to your demat account.
Dividend Date Vs. Ex-Dividend Date And Record Date
Understanding how Ex-date and record date are interrelated is as important as understanding their significance. Although the company decides the record date and the dividend date, the ex-date must be announced according to the stock exchange rules.
If you buy shares, you are permitted a settlement period of exchanges. This is why the ex-date tends to be two days before the dividend record date. It ensures your name will appear on the registered shareholder list on the due date.
Moreover, the dividend payment date is when the company will pay you the dividend. This is naturally after both the ex-date and the record date.
Date Of Record Vs Ex-Dividend Date: Factors To Consider When Trading Stocks
Here are a few factors to consider when trading around ex-dividend date vs record date.
- Understand the purpose of your stock investment.
- Recognize the significance of the dividend payments in stock trading.
- Ensure you purchase stocks before the ex-date to be eligible for the dividend.
- If you buy the stock after the ex-date, the stock seller will receive the dividend.
- If getting immediate dividends is a priority, aim to buy the stocks before the ex-date. If stock appreciation is a priority, the timing can be relaxed.
Ex-Date vs Record Date At a Glance
| Ex-Dividend Date | Record Date |
| Shares purchased on or after this date are not eligible to receive dividends. | It is the date your name must be registered in the company’s books to receive dividends. |
| The stock exchange sets the ex-date | The company announces the record date |
| The ex-dividend date holds more importance as the stock must be purchased before this date. | It holds less importance compared to the ex-dividend date. |
Conclusion
Understanding the difference between ex-date vs record date is vital if you want to profit from announced dividends on the market. However, to build a strong and diversified portfolio, ensure you invest in multiple securities across sectors, various market capitalizations, and in combination with dividend and high-growth stocks.Under such circumstances, rely on SEBI-registered investment advisory partners who provide personalized, diverse, and customized investment portfolios based on your investment priorities.
Ex-Date vs Record Date: FAQs
Can I sell my shares on a record date?
Yes, you can share your shares on a record date. This will still ensure your entitlement to the dividend.
Will selling my shares on the ex-date still give me a dividend?
Yes, despite selling your shares on the ex-dates, you are entitled to the announced dividend.
Can I get a dividend if I buy on ex-date?
No, to receive a dividend, you must purchase the stock before the ex-dividend date.
I’m Archana R. Chettiar, an experienced content creator with
an affinity for writing on personal finance and other financial content. I
love to write on equity investing, retirement, managing money, and more.