Definition
A Stockholder of Record is a common or preferred stockholder whose name is registered on the books of a corporation as owning shares as of a particular date. This particular date is known as the record date. Dividends and other distributions are made only to shareholders who hold the status of record as of this date.
Examples
- Dividend Payment: On March 1st, ABC Corporation announces a dividend payment. Shareholders who are listed as stockholders of record by March 15th will receive the dividend on March 25th.
- Voting Rights: XYZ Inc. sets January 10th as the record date for its annual shareholder meeting. Only those shareholders who are stockholders of record by that date will have the right to vote.
- Stock Split: DEF Corp. announces a 2-for-1 stock split, effective to stockholders of record as of April 5th. If you own 100 shares by April 5th, you will receive an additional 100 shares.
Frequently Asked Questions (FAQs)
Who determines the record date?
The record date is determined by the corporation’s board of directors.
How is the record date different from the ex-dividend date?
The record date is the cut-off date for determining which shareholders are entitled to a dividend, while the ex-dividend date is typically set one business day before the record date. If you purchase a stock on or after the ex-dividend date, you will not receive the next dividend.
Can stockholder of record status change?
Yes, stockholder of record status can change through buying or selling shares. It’s important that your transaction completes before the record date if you want to be recognized as a stockholder of record.
What is the significance of the record date in corporate actions?
The record date helps in identifying the shareholders entitled to receive dividends, participate in shareholder meetings, vote on corporate matters, and partake in other corporate actions like splits or buybacks.
Related Terms
- Ex-Dividend Date: The date on which the stock begins trading without the value of its next dividend payment.
- Record Date: The cut-off date established by a company to determine which shareholders are eligible to receive a dividend or participate in a corporate action.
- Dividend: A distribution of a portion of a company’s earnings, decided by the board of directors, to a class of its shareholders.
- Preferred Stock: A class of ownership in a corporation that has a higher claim on its assets and earnings than common stock.
- Common Stock: A security that represents ownership in a corporation, with voting rights, and the claim on residual earnings.
Online References
Suggested Books for Further Studies
- “The Intelligent Investor” by Benjamin Graham
- “Common Stocks and Uncommon Profits” by Philip Fisher
- “Security Analysis” by Benjamin Graham and David Dodd
- “One Up On Wall Street” by Peter Lynch
Fundamentals of Stockholder of Record: Corporate Finance Basics Quiz
### What is a stockholder of record?
- [ ] Any person who has ever owned stock in a corporation.
- [ ] A person who plans to buy stock in the near future.
- [x] A common or preferred stockholder whose name is registered on the corporation's books as of a specific date.
- [ ] The person responsible for keeping the corporation's stock records.
> **Explanation:** A stockholder of record is a common or preferred stockholder registered on the corporation's books as of a particular date.
### Who determines the record date for dividends and distributions?
- [ ] The shareholders.
- [x] The board of directors.
- [ ] The government.
- [ ] The employees.
> **Explanation:** The record date for dividends and distributions is determined by the corporation's board of directors.
### What rights does a stockholder of record have?
- [ ] No special rights.
- [ ] Only the right to receive notifications.
- [ ] Only the right to attend meetings.
- [x] The right to receive dividends, vote at shareholder meetings, and participate in other corporate actions.
> **Explanation:** Stockholders of record have rights to receive dividends, vote at shareholder meetings, and participate in other corporate actions.
### What date determines who receives dividends?
- [x] Record date
- [ ] Ex-dividend date
- [ ] Payment date
- [ ] Announcement date
> **Explanation:** The record date determines who is eligible to receive dividends.
### What is the ex-dividend date?
- [x] The date on which the stock trades without the value of the next dividend payment.
- [ ] The date when the dividend is paid.
- [ ] The date when the dividend is declared.
- [ ] The date when the record date is set.
> **Explanation:** The ex-dividend date is the date on which the stock trades without the value of the next dividend payment.
### If a shareholder sells their stock after the record date but before the payment date, who receives the dividend?
- [x] The seller
- [ ] The buyer
- [ ] The corporation
- [ ] It is split between buyer and seller
> **Explanation:** The seller, who held the stock as of the record date, will receive the dividend.
### What happens if you buy shares on the ex-dividend date?
- [ ] You qualify to receive the dividend.
- [x] You do not qualify to receive the dividend.
- [ ] It depends on the trade volume.
- [ ] It depends on the market conditions.
> **Explanation:** If you buy shares on or after the ex-dividend date, you do not qualify to receive the next dividend.
### What is the relationship between the ex-dividend date and the record date?
- [ ] They are always the same date.
- [ ] The ex-dividend date comes after the record date.
- [x] The ex-dividend date is typically one business day before the record date.
- [ ] There is no relationship between them.
> **Explanation:** The ex-dividend date is typically one business day before the record date.
### Can stockholder of record status be used to determine voting rights?
- [x] Yes
- [ ] No
- [ ] Only for preferred stockholders
- [ ] Only for common stockholders
> **Explanation:** Stockholder of record status can be used to determine voting rights in shareholder meetings.
### Why is it essential to understand the concept of a stockholder of record?
- [ ] It has no practical relevance.
- [ ] It affects tax calculations.
- [ ] It impacts stock market valuations.
- [x] It determines eligibility for dividends and participation in corporate activities.
> **Explanation:** Understanding the concept of a stockholder of record is essential because it determines eligibility for dividends and participation in corporate activities.
Thank you for exploring the concept of the stockholder of record with us and attempting our sample exam quiz questions. Continue to enrich your knowledge in corporate finance!
