Final answer:
The date on which the shareholder must officially own the stock to receive the dividend is called the record date. Dividends represent a portion of a company's profits distributed to shareholders, whereas capital gains occur when an investor sells the stock for more than they bought it for.
Step-by-step explanation:
The date on which the shareholder must officially own the stock to be entitled to receive the dividend is known as the record date. When a company pays a dividend, it distributes a portion of its profits to its shareholders. The percentage of the profits each shareholder receives is proportional to the number of shares they own.
Companies like Coca-Cola and electric companies that offer stable earnings often provide dividends to their shareholders. Stable dividend payments are a form of return on investment for shareholders, in addition to capital gains, which occur when the value of the stock increases and the shareholder sells for a profit.