Why are record date and ex-date important for investors?

The record date is the cutoff date set by a company to determine which shareholders are officially “on the books” and therefore eligible to receive a declared dividend or distribution.

Investors must purchase a stock at least one business day before the ex-dividend date to be listed as an official shareholder by the record date—in other words, to be eligible for the corporate action.

These two dates are crucial because company ownership changes constantly, so a cutoff date is needed to establish who receives the corporate action.

The ex-dividend date also marks the day when a stock begins trading without the dividend being reflected in its share price.