Final answer:
The recipient of the dividend income is determined by the shareholder's status on the record date. If stock is sold after the declaration date but before the record date, the dividend goes to the buyer if the sale occurs before the ex-dividend date. If the stock is sold after the ex-dividend date, the dividend stays with the seller.
Step-by-step explanation:
When stock is sold after the dividend declaration date but before the record date, the actual dividend income is recognized by whoever is the owner of the stock on the record date. In other words, even if the investor sells the stock before the record date, the dividend is paid to the person who is the registered shareholder on the record date. It’s important to note that there is a distinction between the declaration date, the record date, and the ex-dividend date.
The declaration date is when the company announces it will be paying a dividend. The record date is the date by which you must be on the company's books as a shareholder to receive the dividend. The ex-dividend date is usually set one business day before the record date, and it represents the cutoff date to be entitled to the next dividend payment. The seller of the stock would keep the dividend if the stock is sold after the ex-dividend date but before the record date, as at this point the stock starts trading without its dividend value.