Stock dividend payout, bond interest, can't tell the difference? One article to understand the 3 questions investors care about most

To sum up: What exactly is the purpose of filling the gap?

Many investors buy stocks to receive dividends, but they often overlook an important phenomenon—the stock price automatically adjusts downward after the dividend is paid. For example, a stock with a pre-dividend closing price of 100 yuan and a dividend of 3 yuan per share will automatically adjust to 97 yuan after the ex-dividend date. This is not a problem with the stock itself but a market automatic adjustment mechanism.

The essence of filling the gap is simple: it is the stock price rising from the post-dividend low back to its original pre-dividend level. Only when the stock price fully fills the gap to 100% can investors be considered to have truly received the full dividend. If the stock price remains below that level, even below the ex-dividend price, it effectively means receiving a dividend at a loss.

What does the speed of filling the gap tell us? The Taiwan stock data gives you the answer

The speed at which stocks fill the gap varies greatly. According to statistics from the Taiwan stock market over the past five years:

On average, stocks can complete filling the gap within 30 days after the ex-dividend date. But to judge whether a stock fills the gap quickly, the key indicator is: If a stock has filled the gap within 10 days more than 4 times in the past five years, it is considered to have a relatively fast filling speed.

A comparison with US stocks makes this even clearer. During the tech bull market, Apple (AAPL) often completed the fill within a few days after dividends; while Pepsi (PEP) often took two digits of days. The same market, same dividend payout, but the speed varies greatly, reflecting market expectations for different companies’ prospects.

Not filling the gap equals a loss? Investors often fall into this trap

This is a common misunderstanding among retail investors. If a stock does not fill the gap, it means the stock price has fallen more than the dividend amount, and the cash dividend received is actually offset by the decline in stock price.

For example: You buy a stock at 100 yuan and receive a 3 yuan cash dividend, but after the ex-dividend date, the stock price only rises to 96 yuan. The result is an actual loss of 1 yuan. This does not even account for dividend tax. For short-term investors who need to pay taxes, the loss is even more apparent.

Even more risky, investors are often misled by the expectation of “fast historical gap filling.” Because a stock has filled the gap quickly in the past, the market generally expects it to do so in the future, leading to a surge in buying. As a result, the stock price rises after the ex-dividend date. If you chase and buy at this high point, you risk buying at a high price and facing the risk of chasing the top.

How to find stocks that will truly fill the gap?

Step 1: Check historical gap filling records

US investors can check Dividend.com or DividendInvestor.com; for Taiwan stocks, platforms like CMoney, Financial Report Dog, etc., provide statistics on “probability of filling the gap within 30 days in the past 5 years.” For example, on Dividend.com, after entering the stock page, click “Payout History,” and in the “Days Taken for Stock Price to Recover” column, you can see past records of gap filling days.

Step 2: Filter by filling speed

Use the website’s filtering function to identify stocks that have filled the gap within less than 10 days as initial candidates.

Step 3: Further verification

Don’t just look at the number of days to fill the gap; also check the following three aspects:

• Dividend stability: Choose companies with a stable dividend history and good profitability. These companies are more likely to fill the gap after the ex-dividend date because they have continuous earnings and dividend-paying capacity.

• Market sentiment: Observe the market’s attitude toward the company. If the market is optimistic about the company’s prospects, the stock price is more likely to rise and fill the gap after the ex-dividend date. Conversely, if the market is pessimistic, the risk of a discount increases.

• Industry position: Companies in growth industries or with industry-leading positions are more likely to be favored by the market and fill the gap after the ex-dividend date.

Filling the gap days are important, but they shouldn’t be the sole basis for stock selection

The speed of filling the gap indeed reflects market confidence in the company. Fast filling indicates market optimism, while slow filling or discounts suggest pessimism. But there is a psychological trap: Many investors assume that “fast gap filling in the past” means “fast filling in the future,” leading to collective expectations.

When everyone rushes in based on the same expectation, it becomes difficult to buy at a low price to enjoy the dividend benefit. After the ex-dividend date, stock prices often rise quickly, causing latecomers to buy at high prices.

More importantly, from a long-term perspective, whether a stock fills the gap or not is just a short-term price fluctuation. True value investors should focus on the company’s earnings potential and growth prospects, not be led by stock price swings.

Final reminder: Build a rational stock selection framework

The phenomenon of filling the gap does exist, and the speed of filling can be a useful reference indicator, but it should never be the sole criterion for stock selection. A rational approach is:

View the gap filling days as a window into market sentiment and expectations, combined with fundamental analysis of the company, industry trends, and market sentiment. Only then can you avoid being misled by short-term price fluctuations and make truly scientific and rational investment decisions.

Remember: fast filling does not necessarily mean a good company, and discounts do not necessarily mean a bad investment—what matters most is what you buy and why you buy it.