What is Record Date?
1848 reads · Last updated: December 5, 2024
The record date, or date of record, is the cut-off date established by a company in order to determine which shareholders are eligible to receive a dividend or distribution. The determination of a record date is required to ascertain who exactly a company's shareholders are as of that date, since shareholders of an actively traded stock are continually changing. The shareholders of record as of the record date will be entitled to receive the dividend or distribution, declared by the company.
Definition
The record date, also known as the date of record, is a cutoff date set by a company to determine which shareholders are eligible to receive dividends or distributions. On this date, the company's list of shareholders is finalized to identify who is entitled to the announced dividends or other distributions.
Origin
The concept of the record date emerged with the development of joint-stock companies and stock markets. As stock trading became more active, the list of shareholders constantly changed, necessitating a fixed date to determine shareholder rights. This system helps companies clarify shareholder identities when distributing dividends, ensuring accuracy in distribution.
Categories and Features
The record date is primarily used to determine eligibility for dividend distribution. Its features include: 1. Identifying Shareholders: On the record date, the company's list of shareholders is fixed, ensuring that only those holding shares on this date are entitled to distributions. 2. Enhancing Distribution Efficiency: By setting a record date, companies can effectively manage dividend distribution, avoiding confusion due to changes in shareholders. 3. Transparency: The establishment of a record date allows shareholders to clearly know whether they are eligible for distributions.
Case Studies
Case 1: Apple Inc. announced a dividend payout in a certain year and set a record date. All shareholders holding Apple stock on that date were eligible to receive the dividend. Case 2: Microsoft Corporation, when announcing a stock dividend, also set a record date to ensure the accuracy and transparency of the distribution. This way, the company can effectively manage shareholder rights and ensure fairness in distribution.
Common Issues
Common issues include: 1. Difference between Record Date and Ex-Dividend Date: The record date determines shareholder eligibility, while the ex-dividend date is when the stock begins trading without the dividend. 2. Investors may mistakenly believe that purchasing stock on the record date qualifies them for dividends, but they actually need to hold the stock before the record date.
