Date of record
A date of record is the date on which shares must be acquired by an individual in order to receive dividends. This is set by the firm issuing the shares.
On the date of record, the company determines who the owners are, as well as the number of shares owned by each person. This information is documented and enables the issuer to identify the owners and the amount to be distributed to each shareholder.
Dividends are paid on what is known as a payable date, and may come in the form of cash or stock distribution. These may come from a company’s current profit or from retained earnings. The frequency of distribution is usually on a quarterly or annual basis. Distribution of dividends may be suspended during times of economic difficulty.
Usually, once the shareholders receive their dividends, the stock price drops. Known as trading ex-dividend, this happens for shares which are sold after the date of record. Since the issuer had ownership of the shares concerned on the actual date of record, he is entitled to receive the dividend for those shares. The ex-dividend period begins on the date after the record date and extends until that on which the dividends are paid.
The first day of this period is known as the ex-dividend date. On a similar note, if shares are purchased after the set date of record, these become known as ex-dividend shares.