All you need to know about Dividend Ex date and Dividend record date
If you hold shares in a company, then you must be familiar with terms like ex-dividend and dividend record date. As an investor, you need to understand the relevance and importance of each of these dates specifically. What is the difference between dividend ex-date and record date? We also need to understand what does the ex-dividend date and record date mean? This blog will help you to understand all about Dividend Ex-date and Dividend record date.
What is the importance of record date?
The dividend is paid to all shareholders whose names appear in the shareholder records of the company at the end of the record date. Normally, the shareholder records of a company to decide dividend entitlement is maintained by the registrar and transfer agents like Karvy, In-time Spectrum etc. All the shareholders whose names appear in the records of the RTA as at the end of the Record Date will be entitled to receive the dividends. So if a company declares the record date 20th April, then all the shareholders whose names appear in the company records as at the end of 20th April will be entitled to receive the dividends. But there is a problem here! When I buy shares I get the delivery of shares only after T+2 days that is on the second trading day after the transaction date. That is where the concept of ex-dividend date comes in.
What is the ex-dividend date?
The ex-dividend date actually addresses the above issue of T+2 delivery date. It is fixed as 2 trading prior to the record date. In the above case, since the record date is 20th April, the ex-dividend date will be 18th April. If there are trading holidays in between then the ex-dividend date will be pushed back accordingly. What does the ex-dividend date indicate? You have to buy the shares of the company before the ex-dividend date so that you get the delivery by the record date and therefore are entitled to dividends. The stock normally starts trading ex-dividend on the XD date.