Stockholder of Record: Common or Preferred Stockholder Whose Name is Registered on the Books of a Corporation

August 25, 2024 3 min read Finance Stock Markets Stockholder Ownership Dividends Distributions Corporation

An in-depth look at the definition and role of a Stockholder of Record, the individual or entity registered on a corporation's books as owning shares on a specified date, eligible for dividends and distributions.

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A Stockholder of Record refers to an individual or an entity that is officially registered on the books of a corporation as owning shares of either common or preferred stock as of a specific date set by the corporation. This date is often referred to as the “record date” and is crucial for the purpose of determining who is eligible to receive dividends and other distributions.

Definition and Key Concepts

A stockholder of record is:

Registered: Their name appears on the corporation’s official shareholder registry.
Eligible for Dividends: They receive dividend payments and other corporate distributions as of the record date.
Holder of Common or Preferred Stock: This can apply to both common and preferred stockholders.

The Record Date

The record date is a predetermined date set by a corporation’s board of directors. Only those who own shares on this date are entitled to receive dividends. Navigating to a different concept, let’s consider an example:

Example

If Corporation X sets its record date for dividend distribution as March 1st, anyone who is a verified stockholder on Corporation X’s books as of March 1st will receive the due dividends when they are actually paid.

Historical Context

The process of recording stockholders has evolved with advancements in technology and regulation. Initially, these records were maintained manually in physical books. With digitization, these records are now typically held in electronic form by depositories or transfer agents, ensuring accuracy and efficiency.

Applicability in Financial Markets

Dividends and Corporate Actions

The concept of the stockholder of record is vital in understanding who participates in corporate actions like:

Dividends: Regular cash payments issued to shareholders.
Stock Splits: An increase in the number of shares.
Rights Offerings: Opportunities to purchase additional shares at a discount.
Merger and Acquisition: Entitlements arising from corporate restructuring.

Nominee vs. Stockholder of Record

Nominee: An entity that holds shares on behalf of the actual owner. The nominee is usually a brokerage firm. The actual owner is beneficially entitled to the shares.
Stockholder of Record: Directly registered and recognized by the corporation.

Transfer Agent

A transfer agent is an intermediary that records changes in ownership, facilitating the processes required for maintaining the list of stockholders of record.

Ex-Dividend Date

The ex-dividend date is typically set one business day before the record date. To receive the dividend, an investor must purchase the stock before the ex-dividend date.

FAQs

Why is the record date important for investors?

The record date is critical because it determines which shareholders are entitled to receive dividends or participate in other corporate actions.

How can I become a stockholder of record?

To become a stockholder of record, you typically need to purchase shares before the ex-dividend date and ensure those shares are registered in your name by the record date.

What happens if I sell my shares before the record date?

If you sell your shares before the record date, you will not be entitled to receive the dividends for that period; the new owner of the shares will become the stockholder of record.

References

Investor’s Guide to Dividends [Corp. Finance Institute]
U.S. Securities and Exchange Commission’s Guide to Investment [SEC.gov]

Summary

A stockholder of record is crucial in the corporate world, serving as the official recorded owner of shares on a specific date. This status determines eligibility for receiving dividends and participating in important corporate actions. Understanding the nuances surrounding the record date, including how shares are registered and the role of transfer agents, empowers investors to make informed decisions.

These details, enriched with historical context, applicability in financial markets, and comparisons to related terms, provide a comprehensive understanding of what it means to be a stockholder of record in today’s dynamic investment landscape.