How to assess dividend reinvestment performance after ex-dividend? A must-read guide for investors on dividend replenishment

Whenever listed companies announce dividends, investors’ most concerned question is: will the stock price drop after this dividend? How long will it take to recover? To truly realize the full value of the dividend, the stock price must rebound to its pre-dividend level. This is the so-called “填息” (filling the dividend gap) — a seemingly simple but crucial concept that impacts investment returns.

What are Dividends and Filling the Dividend Gap? What’s the Difference?

When a company decides to return earnings to shareholders, there are usually two forms: cash dividends (配息) or stock distributions (配股). For example, a stock’s closing price before the dividend announcement is 100 yuan, and if the dividend is 3 yuan per share, on the ex-dividend date, the system will automatically adjust the stock price to 97 yuan. This mechanism ensures that shareholders’ total assets (cash dividends plus stock market value) remain the same before and after the transaction.

What does filling the dividend gap mean? Simply put, it refers to the stock price rising back to its pre-dividend level after receiving the dividend. Using the previous example, if the stock price rises from 97 yuan back to 100 yuan, the filling is considered complete. The period from the price dropping to its original level is called the “填息天數” (filling days).

It’s important to note that there are two ways to calculate the filling days: based on the intraday highest price or based on the closing price. Different standards can lead to variations in the statistics.

How quickly is filling considered fast?

To judge the speed of filling for a particular stock, the most straightforward method is to review historical data. According to Taiwan stock market statistics over the past five years, most stocks can fill the dividend gap within 30 days. If a stock has filled the dividend gap more than 4 times in the past five years within 10 days, it indicates a relatively strong filling performance.

It’s worth noting that the US stock market pays less attention to filling days compared to the Taiwan stock market. This mainly stems from US companies often paying quarterly dividends, with smaller amounts each time, so even if filling occurs, the magnitude is limited. In contrast, Taiwan stocks usually have larger dividend amounts, making the filling performance a key indicator for investors.

Is the filling days important? The market psychology behind it

On the surface, the filling days reflect the market’s expectation of the company. When the market is optimistic, stock prices rebound quickly, surpassing pre-dividend levels; when pessimistic, the filling process can be prolonged indefinitely, or even result in “貼息” (not recovering to pre-dividend price).

But there’s a trap that’s easy to overlook: Relying solely on quick filling to judge investment quality is risky. The reason is that historically, rapid filling tends to reinforce market expectations, attracting a large number of follow-on buyers, which further accelerates the filling process. However, this is just a self-fulfilling phenomenon based on price movements and does not guarantee future occurrences.

When the market is generally optimistic about a stock, it becomes difficult to buy in at low prices to enjoy the dividend bonus. Instead, increased buying can cause the stock price to soar after the dividend, leading latecomers to buy at high prices.

Practical methods to find stocks that fill the dividend gap promptly

To identify stocks that tend to fill the dividend gap quickly, systematic tools can be used:

Query channels include:

• The official dividend policy page on the company’s website
• Professional financial data websites such as Dividend.com, CMoney, 財報狗 (Financial Report Dog), etc.

For example, in the US market, checking Apple Inc. (AAPL) on Dividend.com to see its filling record only requires three steps: search for the stock code AAPL → click on Payout and historical dividend records → view the “Days Taken for Stock Price to Recover” column to see the filling days.

Apple’s recent two-year dividend filling days are mostly single digits, while for other large companies like Pepsi (PEP), they are often two digits. If you want to find stocks that fill quickly, you can filter for stocks with filling days less than 10 days directly on Dividend.com.

Besides checking filling records, you should also evaluate comprehensively:

• Dividend stability: Choose companies with long-term stable dividend records and strong profitability
• Market expectations: Observe the market’s attitude towards the company’s future prospects; optimistic expectations are more conducive to filling
• Industry position: Companies in growth industries or with leading market positions are more likely to be favored after the dividend

What are the consequences of not filling the dividend gap?

When a stock’s price remains below its pre-dividend level for a long time after paying dividends, investors have effectively received a “discounted” dividend. The expected dividend is offset by the stock price decline, sometimes resulting in negative overall returns. This is especially true for short-term investors who need to pay dividend taxes, making losses more apparent.

However, from a long-term investment perspective, whether the stock fills the dividend gap or not is just short-term volatility. True value investors should not overly focus on these price fluctuations but instead concentrate on the company’s earnings potential and growth prospects.

Summary: Finding the right balance

What is filling the dividend gap? In short, it is the process of stock price recovery after dividend distribution. While the filling days can reflect market sentiment, they are not the sole indicator of investment quality. Investors should treat it as one of many reference signals, combined with fundamental analysis, industry trends, and market environment for comprehensive decision-making. Chasing stocks that fill quickly can trap investors in market expectations. Rational investing involves using a multi-dimensional analysis framework to evaluate whether a stock is worth buying, rather than being misled by superficial phenomena.