If you want to make the most out of your investment then you have to know the difference between the dates given below. With the help of these dates, you can act smart and can know exactly when to buy and sell the shares while being entitled to dividends and bonuses.
1) Announcement Date:-
The date on which a company announces the bonus/split/dividend etc. is known as announcement date.
Say, a company has announced a bonus in the ratio 1:2 on 10-6-2019.
2) Record Date:-
The date on which investors must have shares in their Demat account to enjoy the benefit (of bonus shares, split, dividend, etc.) declared at the announcement date.
On this day, if you are holding shares then you are entitled to get a bonus.
3) Ex – Bonus (excluding bonus) Date:-
The date on which the share price is adjusted on stock exchanges according to the bonus ratio.
The date on which share starts trading at a revised price.
This date comes between the announcement date and record date.
Here, you have to buy shares at least one day before the ex-bonus date because the Indian system follows a T+2 day settlement system. So, if you buy on 23-7 then the shares will come to your Demat on 25-7.
Q) When to start buying shares to be eligible for bonuses or dividends?
A) You can start buying from the announcement date to one day before the ex-bonus date.
Don’t buy on the record date.
After giving a bonus in the ratio 1:2 (in our example) share price decreases proportionately, means halved.
So, assume the current market price of Reliance is Rs. 1200. This price is also known as before bonus or cum bonus. After giving a bonus the post bonus also known as ex-bonus is Rs. 600 and the face value will remain the same but the number of shares increases.
Cum Bonus/Cumulative Bonus/(Before Bonus) price is Rs. 1200
Ex – Bonus (Post Bonus) price is Rs. 600.
If you want a bonus then you have to buy at a higher price and this higher price will last till before the ex-bonus date. The last date on which it would have traded at Rs. 1200 is 22-7-2019.
Buy before Ex – Bonus Date and hold till Record Date+1.
Q) On which date does the price adjust?
A) Ex – Bonus Date.