## Does Dividend Payout Really Drag Down Stock Prices? Let's Look at the Historical Data

Dividend distribution has always been an important indicator for investors to assess the quality of listed companies. Companies that can consistently pay stable dividends often demonstrate a robust business model and sufficient cash flow. For this reason, in recent years, many investors have regarded high-dividend stocks as core holdings, with even Warren Buffett allocating over 50% of his assets to such stocks.

But for investors new to dividend payouts, there's always a question: **Will stock prices definitely fall on the ex-dividend date? When is the best time to buy?** This time, we will clarify this issue using data and case studies.

## Why Do Dividends Affect Stock Prices? The Underlying Mathematical Logic

To understand the price movements on the ex-dividend date, we first need to grasp the mechanisms of dividends and stock splits.

**In the case of dividends:** The company distributes cash dividends to shareholders, which is equivalent to a direct reduction of the company's assets. Although shareholders receive cash, the overall value of the company is divided, so the stock price theoretically adjusts downward.

**In the case of stock splits:** An increase in share capital dilutes the value represented by each share, requiring a downward adjustment of the stock price. The calculation formula is:
**Post-split stock price = (Original price - Split price) / (1 + Split ratio)**

For example: A company's stock price is originally 10 yuan, with a split price of 5 yuan, and a split ratio of 1 new share for every 2 shares held. Then, the post-split stock price = (10 - 5) / (1 + 1) = 2.5 yuan.

## Is a Price Drop on the Ex-Dividend Date Inevitable? The Historical Evidence Shows Otherwise

**Theoretically,** stock prices should decline on the ex-dividend date. But in practice, the trend is not so absolute.

Take Coca-Cola as an example. The company has a decades-long history of paying dividends quarterly. However, recent observations show that on the ex-dividend dates of September 14, 2023, and November 30, 2023, the stock actually rose slightly; only on June 13, 2025, and March 14, 2025, did the stock price decline. The same pattern appears with Apple—due to market enthusiasm for tech stocks, Apple’s ex-dividend date on November 10, 2023, saw the stock rise from $182 to $186; this year’s ex-dividend date on May 12 also increased by 6.18%.

Industry leaders like Walmart, PepsiCo, Johnson & Johnson also often see stock price increases on ex-dividend days.

**Why does this happen?** Because stock price movements are influenced by multiple factors—market sentiment, company performance, industry outlook, and more—all stacking together. The pure effect of dividends is often offset by other forces.

## How to Decide Whether to Enter Before or After the Ex-Dividend Date? Three Key Perspectives

**Perspective 1: Stock Price Performance Before the Ex-Dividend Date**

If the stock price has already risen to a high level before the ex-dividend date, many investors may choose to take profits early, leading to selling pressure near the ex-dividend date. Entering at this point may not be wise, as the stock price has already priced in optimistic expectations.

**Perspective 2: Historical Patterns After Dividends**

Statistically, stocks tend to decline in the short term after the ex-dividend date rather than rise, which is unfavorable for short-term traders. **However, if the stock price continues to decline until it hits a technical support level and begins to stabilize, it could be a good buying opportunity.**

**Perspective 3: Company Fundamentals and Holding Period**

This is the most critical criterion. For companies with solid fundamentals and stable industry positions, dividends are more of a technical adjustment rather than a reduction in value. Conversely, this provides long-term investors with opportunities to buy quality assets at lower prices. Buying after the ex-dividend date and holding long-term is often a more cost-effective strategy.

## Understanding the Two Trends of Post-Ex-Dividend Stock Prices: Fill-Back and Discount

**Fill-Back (填權):** After the ex-dividend date, the stock price temporarily drops, but as investors remain optimistic about the company's prospects, the stock gradually recovers to pre-dividend levels. This reflects market confidence in the company's future growth.

**Discount (貼權):** The stock remains depressed after the ex-dividend date and never returns to pre-dividend levels. This usually indicates market concerns about the company's future, possibly due to poor performance or changing market conditions.

Using the previous example: if the stock price drops from $35 to $31 after the dividend, and then rises back to $35, it is a fill-back; otherwise, it is a discount.

## Hidden Costs of Dividend Investing: Taxes and Transaction Fees

Investors often focus only on stock price movements and overlook hidden costs.

**Tax implications on dividends:** Holding dividend-paying stocks in taxable accounts creates an awkward situation—stock prices drop due to dividends (unrealized loss), while investors still need to pay taxes on the received dividends. For example, buying at $35, then dropping to $31 on the ex-dividend date, but still paying taxes on the $4 dividend. This can be quite unfavorable tax-wise. Conversely, using tax-advantaged accounts like IRAs or 401(k)s can avoid this issue.

**Transaction fees and trading taxes:** For example, in Taiwan:
- Buying/Selling commission = Stock price × 0.1425% × broker discount rate (usually 50-60%)
- Selling transaction tax = Stock price × tax rate (ordinary stocks 0.3%, ETFs 0.1%)

Frequent trading can gradually erode returns through these costs.

## Investment Recommendations: How to Rationally Approach Ex-Dividend Opportunities

Based on the above analysis, investors should consider the following when making decisions before or after the ex-dividend date:

**Step 1:** Assess the company's fundamentals—whether it is worth holding long-term.

**Step 2:** Observe whether the stock price has been overly stretched before the ex-dividend date and if there is selling pressure.

**Step 3:** For fundamentally sound companies, the post-dividend pullback may be an opportunity to buy at a lower price; for short-term speculation, more caution is advised.

**Step 4:** Calculate tax and transaction costs to determine if the actual net gain justifies the trade.

Dividends themselves are not necessarily a bad thing; the key is for investors to understand their mechanisms and avoid blindly following the crowd or over-trading. For companies with strong fundamentals and stable dividends, the ex-dividend date often isn't a selling point—in fact, it may be an opportunity to acquire quality assets at a lower price.