## Will Stock Prices Drop on Ex-Dividend Date? These Leading Stocks Prove Otherwise with Real Actions

High-dividend stocks attract investors primarily because of stable cash flow returns. However, when it comes to the ex-dividend mechanism, many novice investors often fall into a misconception: **thinking that stock prices must drop on the ex-dividend date**. In reality, this perception needs to be re-examined.

### The Surface Logic Behind Stock Price Drop on Ex-Dividend

On the ex-dividend date, theoretically, the stock price should adjust accordingly. The reason is simple—when a company pays cash dividends, it means assets are leaving the company, and the value per share decreases accordingly.

For example, suppose a company has an annual earnings of $3 per share, with a valuation of 10 times earnings, making the stock price $30. The company's balance sheet shows accumulated cash reserves of $5 per share. At this point, the total valuation is $35 per share.

If the company decides to distribute a special dividend of $4, the stock price should theoretically adjust from $35 to $31 on the ex-dividend date. This is the standard textbook explanation.

But reality is much more complex.

### Multiple Factors Drive Stock Price Movements

**Stock prices do not necessarily fall on the ex-dividend date**, and this is well-verified by market practice.

Take Coca-Cola as an example, a company with over 50 years of consecutive dividend payments. Analyzing its recent performance shows that on the ex-dividend dates of September 14, 2023, and November 30, 2023, the stock actually rose slightly; whereas in the same period in 2025, the stock experienced a slight decline. These fluctuations are not random but result from multiple factors—market sentiment, earnings expectations, overall industry conditions, etc.

Apple Inc. presents an even more typical case. Amid high enthusiasm for tech stocks, Apple often moves counter to expectations on ex-dividend dates. On November 10, 2023, the ex-dividend date, Apple's stock price rose from $182 to $186; on the recent May 12, 2023, ex-dividend date, the increase even reached 6.18%.

Industry leaders like Walmart, PepsiCo, and Johnson & Johnson also frequently show strong performance on ex-dividend dates. This indicates an important signal: **the market’s confidence in these companies’ fundamentals is so high that it can offset the nominal value loss caused by the dividend payout**.

### Filling and贴息: A Barometer of Investor Confidence

Understanding these two concepts is crucial for investment decisions.

**Filling the rights and dividends** refers to the stock price gradually recovering after the ex-dividend date, eventually returning to or approaching pre-dividend levels. This reflects optimistic investor expectations about the company's future growth—nominally, the stock price drops, but the company's actual value remains intact and is re-recognized by the market.

**贴息 (discounted rights and dividends)**, on the other hand, means the stock price remains sluggish after the ex-dividend date and fails to recover to pre-dividend levels. This usually indicates investor doubts about the company's prospects, possibly due to poor earnings or changing market conditions.

Using the previous example: if the stock price recovers from $31 to $35 after the ex-dividend date, it completes a filling of rights and dividends; if it stays below $31 or continues to decline, it is in a discounted rights and dividends state.

### Timing of Entry Before and After the Ex-Dividend

**Risks of buying before the ex-dividend date at high prices**

As the ex-dividend date approaches, stock prices often rise to high levels. Entering at this point carries two main risks: first, some investors may take profits early to avoid taxes, creating selling pressure; second, the stock price may already include excessive expectations for future dividends, risking a bubble burst. Therefore, chasing high prices before the ex-dividend date is generally unwise.

**Technical support levels after the ex-dividend date**

Historical data shows that stocks tend to be more prone to decline after the ex-dividend date. But this is not necessarily bad news—when the stock price falls to a technical support level and shows signs of stabilization, it often signals a good buying opportunity, with relatively low risk.

**Long-term perspective on fundamentally solid companies**

For companies with stable industry positions and solid fundamentals, the ex-dividend date should be viewed as an opportunity for price adjustment rather than a reduction in value. For such companies, buying after the ex-dividend date and holding long-term is often more cost-effective—since the intrinsic value remains unchanged by dividends, the price correction provides a window to acquire quality assets at a better cost.

### Hidden Costs Cannot Be Ignored

**Tax implications on dividends**

If investors use tax-deferred accounts (like US IRAs or 401(k)s) to buy dividend stocks, tax burdens are lighter. But in regular taxable accounts, the situation is more complicated. Investors may face dual costs—realized capital losses and taxes on cash dividends received. However, if dividends are reinvested into the company's stock and the stock price recovers quickly, buying before the ex-dividend date can still be meaningful.

**Transaction fees and taxes**

In Taiwan’s stock market, the transaction fee is calculated as: stock price × 0.1425% × broker discount rate (usually 50-60%). When selling, a transaction tax of 0.3% for regular stocks and 0.1% for ETFs applies. These costs may seem small, but for frequent traders, they can gradually eat into returns.

### Core Elements of Rational Decision-Making

The stock price performance of dividend-paying stocks on the ex-dividend date is influenced by multiple factors. Investors should not blindly follow the stereotype that "stock prices must fall on the ex-dividend date." A more prudent approach is to:

- Assess whether the pre-ex-dividend stock price was already at a high level,
- Review historical filling of rights and dividends performance after ex-dividend dates,
- Evaluate the company's current fundamentals.

At the same time, clarify your investment goals—are you seeking short-term volatility gains or long-term stable returns?

For industry leaders with strong fundamentals, the ex-dividend date is often a good opportunity to add positions for value investing. Conversely, for companies with unstable earnings or in decline, even if the stock price drops after the ex-dividend date, it may not be worth buying.

Ultimately, **rational investment decisions should be based on an understanding of the company's intrinsic value, rather than simply chasing technical changes around the ex-dividend date**.