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Record Date for Dividend and Bonus Shares in India | Why is Record Date after Ex-Date?

What is the Record Date for Dividend?

What is the Record Date for Dividend as it applies to the world of dividends and shares investing?
We also need to understand what does ex dividend date and payment date mean? Is it possible to sell between ex-dividend date and record date in India?

When it comes to the world of dividends, there are 4 important dividend dates that you should be concerned with:

  1. Dividend Announcement Date
  2. Ex-Dividend Date
  3. Dividend Record Date
  4. Dividend Payment Date

Shareholders should become familiar with all four dates before buying a dividend stock, as being able to identify these dates will assist avoid any potential confusion.
This article will discuss each date in detail, and use example to show how these dates can be easily found for specific companies in India.

Also Read What is a Rights Issue of Shares? | Rights and Bonus Issue | Example | Eligibility | Types

Dividend Announcement Date

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The date of declaration is really just the announcement date.
The announcement’s conference includes the date of dividend distribution, the size of the dividend,
how much dividends the shareholders will receive for each holding share, and the record date.
Whether you buy the stock before, on, or after the date of declaration doesn’t matter in regard to receiving the dividend.

Record Date for Dividend

The date of record of dividends is the cutoff date decided by the corporation which establishes the list of qualifying stockholders for the aim of distribution of dividends.
The date of records, also known as “Record Date” in India.

The record date determines the list of stockholders as of a specific date,
and only those stockholders whose name appears in the list become qualified for receiving dividends on their stocks.

Generally, the shareholder records of a company to decide dividend entitlement is maintained by RTA i.e. registrar and transfer agents ( For instance: Karvy, In-time Spectrum etc.). 

Therefore, if a company declares the record date 17th June, then all the shareholders whose names appear in the company records as at the end of 17th June will be entitled to receive the dividends.

But, one question which comes to our mind,
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 the where the concept of ex-dividend date comes into the picture.

Also Read How to Apply for Rights Issue through Online? – Bank or Demat a/c or RTA Website

Ex-Dividend Date

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The Ex-dividend date is generally two trading days before the record date in India.
In order to be able to get the dividend, you will have to buy the share before the ex-dividend date.
If you buy the share on or after the Ex-dividend date, you won’t get the dividend.

In the above scenario, since the record date is 17th June, the ex-dividend date will be 15th June.
If there are trading holidays in between then the ex-dividend date will push back accordingly. 

Why is Record Date after Ex-Date?

The ex-dividend date also knows as ex-date is fixed as per the rules set by the stock exchange.
It is generally set for a period of up to two trading days before the record date in India.
If the shares are transferred from a seller on or after the record date of dividend, then the seller only remains able for dividends and not the buyer.
This is because the record list (i.e. list of stockholders) one day before the ex-dividend date is considered for dividend distribution.
The key reason why ex-dividend dates and record dates are different is that settlement of shares and updating of the record list of the companies take some time.
Therefore, on the record date, a company checks the list eligible for dividends based on the ex-dividend date.

Also Read What is Difference between Record Date and Ex-Dividend Date? | Do Share Prices Drop after Dividend in India?

Payment Date

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Payment of Dividend is the date on which the shareholders receive the dividend. It is the final stage in the dividend process in India.

This date will depend on whether the payout is an interim dividend or final dividend.

  • Interim Dividend – The payout to the shareholders has to happen within 30 days from the date of the declaration of the dividend.
  • Final Dividend – The actual payment of dividend only has to be made within 30 days of the AGM i.e. Annual General Meeting.

Dividends declared by company are directly credited to your registered bank’s account linked with the demat profile,
or a cheque is issued as per the policy of the company.

You might be confused with all of these dividend dates. Therefore, let’s understand the timeline with an example:

Example

DateComments
Dividend Announcement DateJune 01The date that the company declares the dividend.
Ex-Dividend DateJune 15The date before which you must purchase the share to be eligible for dividend payment.
Date of RecordJune 17This date is the cutoff date that determines the eligibility of shareholders to receive the dividend.
Payment DateJune 30The date on which company pays a dividend to its shareholders.

Similarly, the concept of “record date for bonus shares” is same.

Record Date for Bonus Shares

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The record date is a cutoff date set by the company.
However, If you are the holder of the shares of the company on this cutoff date, then you are able to receive the bonus shares.
This date is set by the company so that they can find the eligible shareholders and distribute bonus shares to them.

Also Read Rights Issue Advantages and Disadvantages – Is Rights Issue Good or Bad in 2021?

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