Can i sell on record date and still get dividend: Many investors in the stock market buy stock for the long term in order to generate long-term wealth.
On the other hand, there are some individuals who look for a source of passive income from the stock market and they do it by selecting the stocks that pay them dividends.
These individuals will only have the intention to earn dividends from the stocks and they do not aim to hold the stock for the long run in order to generate long-term wealth.
In these situations, a question pops into the minds of the individuals “can I sell on record date and still get dividend”. In this article, we cover the answer to the question “can i sell on record date and still get dividend”?
What Are Dividends?
Dividends are the sum of money paid by a company from its profits to its shareholders. These dividends are typically paid by the company on a yearly or quarterly basis in the form of cash to the shareholders of the company
This dividend paid is a way to reward the shareholders for investing in the company.
Paying dividends also helps the company in attracting new investors and retain existing investors since the investors are more likely to invest in a company that pays dividends rather than one that does not.
Furthermore, paying dividends can signal to the market that a company is financially stable and has a strong cash position.
How Do Dividends Work?
Dividends are paid from a company’s profits, which are the earnings after deducting expenses such as salaries, rent, and taxes.
When the dividend is declared by the company, they also announce the amount of dividend they are paying for each share, Suppose, a company declares a dividend of Rs 50 per share, and an investor who owns 100 shares of the company will receive Rs 5000 as a dividend payment.
Important Dates For Dividend Payments
Dividend payments are distributions of profits made by a corporation to its shareholders. The following are important dates to keep in mind for dividend payments:
It is the day when the company declares to pay dividends to its shareholders. In the announcement, the company specifies the date on which it will make the dividend payment as well as the amount of dividend to be paid.
This is expressed either in rupees or as a percentage of the face value of the shares.
The ex-dividend date is the last day by which investors should purchase shares of a company in order to receive the next dividend payment.
It acts as a deadline for individuals to buy the shares if they wish to receive the next dividend payment.
The individuals who purchased the shares of the company post the ex-date will not be eligible for the dividends paid by the company.
The company determines whether the shareholders are entitled to receive the declared dividend on the record date.
The names of the shareholders that appear on the company’s record at the end of the record date will be eligible to receive dividends.
On the other hand, if the individuals have purchased the shares on the record date, they will not be entitled to receive dividends as one to two business days for a stock to be delivered and reflected in the company records
The day on which the dividend is distributed by the company to its shareholders is called the payment date. This payment shall be made within 30 days from the announcement date in case of an interim dividend.
When it comes to the final dividend, it must be distributed by the company within 30 days of its Annual General Meeting (AGM).
Can I Sell On Record Date And Still Get Dividend?
As discussed earlier, the company determines if the shareholders are eligible to receive dividends on the record day. To be eligible for a dividend, you must own the shares on the record date.
You will not be entitled to receive the dividend payment if you sell your shares before the record date.
But, if you sell your shares on or after the record date, you will still be eligible for the dividend payment as long as you possessed them at the conclusion of trade on the record day.
in summary, you can sell your shares on or after the record date and still collect the dividend, but if you sell before the record date, you will not receive the dividend.
Impact Of Dividend On Share Prices
When the company announces that it is going to pay dividends, the shares will carry the value of dividends which increases the price of the shares.
This occurs due to the increase in demand for the stock when the dividend is issued. The rate of increase in the share price will depend upon the amount of dividend that the company has announced to pay.
Suppose, a company announces a dividend of Rs.5 per share, the stock of the company will also rise by approximately Rs. 5.
Similarly, when the dividend is distributed, the stock will fall in proportion to the dividend that is paid out to its shareholders.
In this article, we discussed the meaning of dividend, how it works and the timelines of dividend payment. Most importantly, we answered the question “Can I sell on record date and still get dividend?”
Though companies give out dividends to their shareholders, it is important to note that the price of the shares decreases in proportion to the dividends paid by the company.
Thus, it can be difficult to exit the stock quickly as soon as it pays out dividends.
Individuals can tackle this situation by buying dividend shares when they are trading at a discount which can help them sell their shares if they want even after the adjusted price fall.
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