So you finally want to figure out the exact difference between the ex-dividend date and the record date?
If you’re a dividend investor, you know that stocks which pay dividends set three important dates around the determination, announcement, and distribution of dividends: the payment date, the record date (or date of record) and the ex-dividend date. Let’s take Canadian energy trust Enerplus Resources Fund (TSX: ERF.UN) as an example (but the exact dates will change each month):
Payment Date: 20th day of every month
Record Date: February 10th
Ex-Dividend: February 8th
The payment date is simple enough: that’s the day the dividends will be booked and appear in your brokerage account (or sent to you by cheque) [you might receive the dividends a day or two earlier or later, depending on whether or not the dividend date falls on a weekend or holiday]. But let’s look closer at the other two.
What Is the Record Date?
The record date is the date on which you must be a holder of the stock (i.e., a shareholder or unitholder) in order to receive the dividends for the upcoming payment date. In the above example it is February 10th. This means that if you purchased the stock and the transaction is fully settled in your brokerage account by February 10th, then you will receive the dividends or distributions on your most recent purchase on the upcoming payment date (which is usually 7-10 days later).
Shareholders of record on the record date also receive the annual, semi-annual and other stockholder voting materials from the record date onwards. Thus, you might receive some of these in the mail (or your inbox) before you’ve received the dividend.
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How is the Ex-Dividend Date Different From the Record Date?
OK, so here is the little twist. The ex-dividend date is there to help you out as a reminder that you need to purchase your stock several days before the record date in order for you to actually be included as a shareholder on the record date. This is because any single stock purchase or transaction can take up to three stock business days in order to “settle” in your account.
It’s the record date that really matters, but without this added warning people would mistakenly place buy orders a day before the record date and not realize they would still miss it because the transaction will take a few days to settle.
If I were you, I’d just make sure you place your orders a couple days before even the ex-dividend date, especially if there’s a weekend or holiday falling between these dates.
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What About Selling Stocks and Missing Out On the Dividends?
If you want to make sure you are entitled to receive the last possible dividend before you sell your stock, make sure you hold the stock past the record date (as in the examples above). But if you sell your stock before the ex-dividend date (which ensures you will not own it on the record date), you will not receive the upcoming dividends.
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Nice, simple explanation!
Interesting as always. Distibution date and record date had cause me some trouble among the way since I wrote in my calenday the pay day and so on for all of the investments I made. Also something related to this is the DRIP. I never received my dividend on the day giving because of the DRIP. I always received the new stocks or units a week later if not 2. Same thing for the money left of the DRIP, its being depost before or after once the new stocks had been add on. A real headache for investors like myself with no or poor experience.. But after calling my broker a few times for the same thing because I didn’t understand, I understood that it was the reality and I have to live with it… just like my laid off of BMO Bank of Montreal… lol ciao.
@Sunny – yes, it takes some getting used to. When you make a DRIP purchase, you have to time it so you know when it will be purchased – and it differs between the transfer agents and by stock, I believe (eg., BMO, BNS purchase at the end of each month, but most others don’t).
I don’t see the record date as often, but I usually have no problem finding the ex-dividend date. why is that?
you are wrong, record date doesnt matter…it is the ex-dividend date that is important
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