Why do stock prices go down on ex-dividend?
The price of a stock tends to fall by the amount of the dividend on its ex-dividend date, reflecting that its assets will soon be dropping by the amount of the dividend.
If you buy stocks one day or more before their ex-dividend date, you will still get the dividend. That's when a stock is said to trade cum-dividend, or with dividend. If you buy on the ex-dividend date or later, you won't get the dividend. The ex-dividend date is in place to allow pending stock trades to settle.
This often causes the price of a stock to increase in the days leading up to its ex-dividend date. Then, when the market opens on the ex-dividend date, the security will usually drop in price by the amount of the expected dividend or distribution to be paid.
Key Takeaways
Since stockholders, but not options holders, get paid dividends, when a stock goes ex-dividend, call prices decline and put prices rise.
The ex-dividend date is the first day of trading in which new shareholders don't have rights to the next dividend disbursem*nt. However, if shareholders continue to hold their stock, they may qualify for the next dividend. If shares are sold on or after the ex-dividend date, they will still receive the dividend.
Regardless, if you'd like to sell your shares and still get the dividend, hold onto them until the Ex-Dividend Date. Sell on or after the Ex-Dividend Date and you'll still receive the dividend.
If you buy a stock one day before the ex-dividend, you will get the dividend. If you buy on the ex-dividend date or any day after, you won't get the dividend. Conversely, if you want to sell a stock and still get a dividend that has been declared, you need to hang onto it until the ex-dividend day.
When it comes to investing for dividends, there are three key dates that everyone should memorize. The three dates are the date of declaration, date of record, and date of payment.
The day before the ex-dividend date is the last day to buy a stock and be eligible to receive the dividend payment. The ex-date is also the day when the stock price often drops in accordance with the declared dividend amount. Traders must purchase the stock prior to this critical day.
No, you won't get the dividend if you sell before the ex-date, because you would not be recorded as an investor entitled to dividends on the record date. You'll need to hold the shares until the ex-date or later to receive the payout.
How do you adjust stock prices after dividends?
Dividend Adjustment Calculation Details
The amount of the dividend is subtracted from the prior day's price; that result is then divided by the prior day's price. Historical prices are subsequently multiplied by this factor.
SPDR S&P 500 ETF Trust (SPY)
SPY has a dividend yield of 1.29% and paid $6.72 per share in the past year. The dividend is paid every three months and the last ex-dividend date was Mar 15, 2024.
After you sell a covered call on XYZ, you collect your premium, and you still receive dividends (if any) and any potential capital gains on the underlying stock (unless it's called away).
At the most basic level, you only need to own a stock by the ex-dividend date (or deadline) in order to get the dividend. And you can sell the stock a day or two after that, once everything settles. So in theory, you only need to own the stock for a couple of days to get the dividend.
Stock | Trailing annual dividend yield* |
---|---|
Crown Castle Inc. (CCI) | 5.9% |
Pfizer Inc. (PFE) | 5.9% |
Boston Properties Inc. (BXP) | 6.2% |
Kinder Morgan Inc. (KMI) | 6.2% |
“Dividend capture strategy” returns are the trading technique of buying a stock just before the dividend is paid, holding it just long enough to collect the dividend, then selling it. If you can sell it for as much as you paid, you have “captured” the dividend at no cost, other than the transaction costs.
The company announces when the dividend will be paid, the amount and the ex-dividend date. Investors must have bought the stock at least two days before the official date of a dividend payment (the "date of record") in order to receive that payment. The company pays out the dividend to shareholders.
Apple's previous ex-dividend date was on Feb 09, 2024. Apple shareholders who own AAPL stock before this date received Apple's last dividend payment of $0.24 per share on Feb 15, 2024. AAPL's next ex-dividend date has not been announced yet.
There's a misconception that dividend stocks are only for retirees or risk-averse investors. That's not the case. You should consider buying dividend-paying stocks whenever you start investing to reap their long-term benefits.
No. If you're being serious – the dividend's simply subtracted from the price on the ex-div date, so there's no possible way to benefit from timing your buying or selling .. You're just as good selling the fund the day before the ex-div date – makes absolutely no difference.
Why buy stocks that don t pay dividends?
Companies that don't offer dividends are typically reinvesting revenues into the growth of the company itself, which can eventually lead to greater increases in share price and value for investors.
Whether you want to live off dividends today or are investing for the long haul, the best way to build a dividend portfolio for steady income is to follow a simple set of risk management principles: Hold between 20 and 60 stocks to reduce company-specific risk. Roughly equal-weight each position.
Preferred stocks have a different holding period than common stocks and investors must hold preferred stocks for more than 90 days during a 181-day period that starts 90 days before the ex-dividend date.2The holding period requirements are somewhat different for mutual funds.
Stock | Forward dividend yield |
---|---|
Exxon Mobil Corp. (XOM) | 3.5% |
Johnson & Johnson (JNJ) | 3% |
Procter & Gamble Co. (PG) | 2.3% |
Home Depot Inc. (HD) | 2.4% |
COMPANY | SECTOR | DIVIDEND YIELD |
---|---|---|
Bristol-Myers Squibb Co. (BMY) | Health care | 4.43% |
Cisco Systems Inc. (CSCO) | Technology | 3.21% |
Comcast Corp. (CMCSA) | Communication services | 2.86% |
Skyworks Solutions (SWKS) | Technology | 2.51% |
References
- https://www.usatoday.com/money/blueprint/investing/best-monthly-dividend-stocks/
- https://www.fool.com/investing/how-to-invest/stocks/how-to-invest-in-coca-cola-stock/
- https://www.koyfin.com/company/ko/dividends/
- https://www.fidelity.com/viewpoints/active-investor/trading-earnings
- https://www.chicagobooth.edu/review/dividends-are-not-free-money-though-lots-investors-seem-think-they-are
- https://finance.yahoo.com/news/5-ways-50-000-passive-120014009.html
- https://www.investopedia.com/articles/stocks/11/dividend-capture-strategy.asp
- https://help.upstox.com/support/solutions/articles/250298-how-can-i-check-the-information-on-dividends-
- https://money.usnews.com/investing/articles/high-paying-dividend-stocks-in-the-s-p-500
- https://www.investor.gov/introduction-investing/investing-basics/glossary/ex-dividend-dates-when-are-you-entitled-stock-and
- https://www.investopedia.com/articles/basics/11/due-dilligence-on-dividends.asp
- https://www.robomarkets.com/blog/stock-market/top-stocks/top-10-monthly-dividend-stocks/
- https://www.investopedia.com/ask/answers/042215/if-investor-short-dividendpaying-stock-record-date-are-they-entitled-dividend.asp
- https://www.investopedia.com/terms/e/ex-date.asp
- https://smartasset.com/investing/how-to-make-500-a-month-in-passive-income
- https://www.quora.com/What-are-the-advantages-of-buying-stocks-after-the-ex-dividend-date
- https://www.investopedia.com/terms/f/four-percent-rule.asp
- https://www.australianshareholders.com.au/avoiding-dividend-yield-traps-a-comprehensive-guide-to-protecting-your-investments/
- https://stockanalysis.com/etf/spy/dividend/
- https://www.dividend.com/dividend-education/everything-investors-need-to-know-about-ex-dividend-dates/
- https://www.dividendmax.com/united-states/nyse/beverages/coca-cola-co/dividends
- https://www.investopedia.com/terms/s/shortselling.asp
- https://www.quora.com/How-many-dividends-should-one-million-dollars-generate-to-be-reasonably-well
- https://medium.com/@Levente22/7-proven-ways-to-make-5-000-9-000-per-month-in-passive-income-1aafbf025154
- https://support.stockcharts.com/doku.php?id=policies:adjusted_data
- https://money.stackexchange.com/questions/46162/when-an-investor-makes-money-on-a-short-who-loses-the-money
- https://www.angelone.in/knowledge-center/share-market/how-long-should-you-hold-a-stock
- https://mydividendsnowball.com/how-i-made-1000-a-month-in-dividend-income/
- https://www.investopedia.com/ask/answers/06/exdividenddate.asp
- https://www.acapam.com/diversification/3-dates-to-remember-if-you-want-a-cash-dividend/
- https://groww.in/blog/what-happens-when-a-stock-is-delisted
- https://medium.com/@Levente22/9-smart-passive-income-ideas-to-make-3-000-per-month-e15154bd558e
- https://www.fool.com/knowledge-center/does-the-settlement-date-have-to-occur-before-the.aspx
- https://www.bankrate.com/investing/passive-income-ideas/
- https://money.usnews.com/investing/articles/best-monthly-dividend-stocks-to-buy-now
- https://www.nasdaq.com/articles/want-%241000-in-dividend-income-in-2024-invest-%2413000-in-these-3-high-yielding-stocks.
- https://www.cabotwealth.com/daily/dividend-stocks/how-long-do-you-have-to-own-a-stock-to-get-the-dividend
- https://www.morningstar.com/stocks/10-best-dividend-stocks
- https://www.bankrate.com/investing/secrets-to-successful-dividend-stock-investing/
- https://www.investopedia.com/terms/q/qualifieddividend.asp
- https://www.nasdaq.com/articles/what-is-the-dividend-capture-strategy-how-to-use-it
- https://www.simplysafedividends.com/world-of-dividends/posts/1-how-to-live-off-dividends-and-how-much-you-need-to-retire
- https://finance.yahoo.com/news/buy-3-highest-paying-dividend-133000935.html
- https://moneyforums.citywire.com/yaf_postsm88363_does-any-one-buy-funds-just-before-they-go-ex-dividend-and-then-sell-afterwards.aspx
- https://www.investopedia.com/trading/dividends-interest-rates-effect-stock-options/
- https://corporatefinanceinstitute.com/resources/equities/investing-in-stocks-with-dividends-vs-stocks-without-dividends/
- https://talkmarkets.com/content/how-much-money-do-i-need-to-invest-to-make-3000-a-month?post=431352
- https://www.sellmyshares.com.au/information/should-i-wait-for-a-dividend-before-i-sell-my-shares/
- https://www.investopedia.com/articles/investing/090915/reinvesting-dividends-pays-long-run.asp
- https://www.investopedia.com/articles/02/110802.asp
- https://www.simplysafedividends.com/world-of-dividends/posts/2-how-to-build-a-dividend-portfolio
- https://www.dividend.com/dividend-stocks-and-options/how-the-ex-dividend-date-can-affect-option-prices/
- https://www.tipranks.com/stocks/aapl/dividends
- https://www.tsinetwork.ca/daily-advice/dividend-stocks/heres-how-dividend-capture-strategy-returns-work-and-whether-you-can-realistically-profit-from-them/
- https://www.usatoday.com/money/blueprint/investing/best-dividend-stocks/
- https://www.5paisa.com/blog/ex-date-vs-record-date
- https://www.quora.com/I-want-to-earn-1-000-USD-every-month-from-dividends-How-much-do-I-have-to-invest-and-where
- https://finance.yahoo.com/news/want-100-super-safe-monthly-102100907.html
- https://learn.robinhood.com/articles/2tXTSCZ44J2WBVZwwyJhJo/what-is-ex-dividend/
- https://www.businessinsider.com/how-to-make-money-online-passive-income-digital-product-ideas-2022-12
- https://www.investopedia.com/ask/answers/06/shortedstock.asp
- https://finance.yahoo.com/news/earn-500-per-month-realty-185123122.html
- https://ca.finance.yahoo.com/news/much-invest-2-000-monthly-160000919.html
- https://money.usnews.com/investing/articles/dividend-stocks-to-buy-and-hold-forever
- https://www.forbes.com/advisor/banking/savings/millionaire-calculator/
- https://smartasset.com/taxes/how-do-i-avoid-paying-tax-on-dividends
- https://www.tsinetwork.ca/daily-advice/dividend-stocks/ex-dividend-date-investing-strategy/
- https://www.techopedia.com/does-amazon-pay-dividends
- https://money.stackexchange.com/questions/26345/can-you-short-a-stock-before-the-ex-div-date-to-make-a-profit
- https://www.fool.com/investing/2018/07/13/ask-a-fool-is-a-10-dividend-yield-too-good-to-be-t.aspx
- https://www.moneycontrol.com/news/business/markets/mc-explains-why-do-stocks-fall-after-dividend-payout-by-firms-10073541.html
- https://www.investopedia.com/terms/d/dividend.asp
- https://www.investopedia.com/terms/s/stockdividend.asp
- https://www.schwab.com/learn/story/options-trading-basics-covered-call-strategy
- https://www.nerdwallet.com/article/investing/what-are-dividends
- https://www.coca-cola.com/us/en/about-us/faq/when-does-the-company-pay-dividends
- https://finance.yahoo.com/news/much-money-live-entirely-off-204845865.html
- https://www.investopedia.com/ask/answers/maintain-short-position-delisted-stock/
- https://www.fool.com/investing/how-to-invest/stocks/how-to-short-stock/
- https://support.tastytrade.com/support/s/solutions/articles/43000435205
- https://www.nasdaq.com/articles/do-this-for-$4000-in-dividend-income-every-month
- https://www.fool.com/investing/stock-market/types-of-stocks/dividend-stocks/how-to-invest-in-dividend-stocks/
- https://www.sharesight.com/blog/ex-dividend-dates-and-their-impact-on-stock-prices-explained/
- https://www.investopedia.com/articles/investing/122315/6-rules-successful-dividend-investing.asp
- https://www.investopedia.com/terms/e/ex-dividend.asp
- https://finance.yahoo.com/news/genius-ways-1-000-month-105500970.html
- https://www.nerdwallet.com/article/taxes/taxes-on-stocks
- https://www.suredividend.com/get-rich-dividends/
- https://smsfwarehouse.com.au/services/tax/dividend-stripping/
- https://money.usnews.com/money/retirement/articles/how-can-i-earn-100-200-or-500-per-month-in-guaranteed-income-in-retirement
- https://www.nasdaq.com/articles/3-stocks-that-could-make-you-richer-in-2024-1
- https://www.investopedia.com/terms/s/shortsalerule.asp
- https://finance.yahoo.com/news/500-every-month-passive-income-130041730.html
- https://seekingalpha.com/article/4652634-how-to-live-off-dividends-forever
- https://www.investopedia.com/articles/investing/091015/how-dividends-affect-stock-prices.asp
- https://www.nerdwallet.com/article/investing/shorting-a-stock
- https://www.nasdaq.com/articles/5-monthly-dividend-stocks-for-passive-income
- https://finance.yahoo.com/news/collect-1-000-per-month-160101397.html
- https://www.bankrate.com/investing/short-selling-how-to-short-a-stock/
- https://www.suredividend.com/pros-cons-dividend-investing/