Will the stock price rise before the dividend payout? Analyzing the stock price pattern on the ex-dividend date for dividend-paying stocks

Will the stock price rise before the ex-dividend date? This is a common concern among novice investors who focus on dividend-paying stocks. Companies with stable dividends often indicate solid business models and ample cash flow, but many investors are confused about how stock prices behave around the ex-dividend date, and whether they should buy before or wait and see.

In fact, many long-term outperforming listed companies have a tradition of consistent dividend payments. In recent years, more investors are treating high-dividend stocks as core holdings. Even “Warren Buffett,” the so-called “Oracle of Omaha,” favors these stocks, allocating over 50% of his assets to high-dividend stocks. However, the actual stock price movement on the ex-dividend date is far more complex than many think.

Three Possible Scenarios for Stock Price Behavior Before the Ex-Dividend Date

Many believe that stock prices must fall on the ex-dividend date, but the reality is not always so straightforward. Historical observations show three possible scenarios:

Scenario 1: Price declines as expected

This is the most common case. Since shareholders will receive cash dividends, the company’s assets decrease accordingly, and the stock price theoretically adjusts downward. The decline in price usually reflects this objective fact.

Scenario 2: Price rises against the trend

Especially for stable, industry-leading stocks, the stock price may actually increase on the ex-dividend date. This indicates market confidence in the company’s future prospects, with buying pressure offsetting the dividend payout’s downward effect.

Scenario 3: Price remains relatively stable

Some stocks show only minor fluctuations on the ex-dividend date. This usually means the market has already priced in the dividend expectation, and the stock price has adjusted in advance.

The Principle of Ex-Dividend: Why Does the Price Adjust?

To determine whether the stock price will rise before the ex-dividend date, we first need to understand how dividends affect stock prices.

When a company pays cash dividends, it means the company’s assets decrease by the dividend amount. While shareholders receive cash income, the stock price also adjusts downward accordingly—this is a logical consequence to keep the company’s total market value consistent.

In theory, on the ex-dividend date, the stock price should equal the previous day’s closing price minus the dividend per share. For example, if a company’s stock is valued at $35 before the ex-dividend date, including $5 in cash reserves, and the company decides to pay out $4 as a special dividend, then the theoretical price on the ex-dividend date would be $31.

In the case of stock splits, the calculation differs slightly. The general formula is:

Post-split stock price = (Pre-split stock price - Split price) / (1 + Split ratio)

For example, if a stock’s pre-split price is $10, with a split price of $5, and a split ratio of 1-for-2, then the post-split average price would be: (10 - 5) / (2 + 1) ≈ $1.67.

Historical Examples: Performance of Leading Stocks on Ex-Dividend Dates

Theoretical models are just hypotheses; actual market performance can be more varied.

Take Coca-Cola as an example. With a long history of paying dividends, it has consistently paid quarterly in recent years. Historical data shows that on the ex-dividend dates of September 14, 2023, and November 30, 2023, Coca-Cola’s stock rose slightly; whereas on June 13, 2025, and March 14, 2025, the stock price dipped slightly.

Apple Inc. presents an interesting case. Also paying quarterly dividends, and given the recent popularity of tech stocks, Apple sometimes experiences significant gains on ex-dividend dates. On November 10, 2023, the ex-dividend date, Apple’s stock rose from $182 the previous day to $186. Similarly, on May 12, 2025, the stock increased by 6.18%.

Other industry giants like Walmart, PepsiCo, Johnson & Johnson also often see stock prices rise or remain stable on ex-dividend dates. This indicates that dividend amount, market sentiment, and company performance all influence the actual price movement on ex-dividend days; it’s not solely determined by the dividend event itself.

Fill-Right vs.贴权息: When Is It Better to Buy Stocks After the Ex-Dividend?

Deciding whether to buy stocks before or after the ex-dividend date depends on two key concepts:

Fill-Right (填權息): After the ex-dividend date, stock prices may temporarily decline, but with positive market sentiment about the company’s fundamentals and growth prospects, prices tend to recover to or near pre-dividend levels. This suggests market optimism about future growth.

贴权息: After the ex-dividend date, stock prices continue to stay depressed and fail to recover to pre-dividend levels. This often indicates investor concern about the company’s future performance, possibly due to poor earnings or changing market conditions.

When considering buying on the ex-dividend date, the main factor is whether the company’s stock price had already shown strong performance before the ex-dividend date.

From pre-ex-dividend performance: If the stock price has already risen to a high level before the ex-dividend date, many investors prefer to realize gains early, especially those seeking to avoid higher taxes. Buying at this point may not be wise, as the price might already reflect excessive expectations or face selling pressure.

From historical post-ex-dividend trends: Statistically, stocks tend to decline rather than rise after the ex-dividend date. For short-term traders, buying afterward carries a higher risk of loss. However, if the price continues to fall to a technical support level and shows signs of stabilization, it might present a buying opportunity.

From a fundamental and long-term perspective: For fundamentally strong companies with industry-leading positions, the ex-dividend adjustment is more of a price correction rather than a loss of value. In fact, it can be an opportunity to buy quality assets at a lower price. For such stocks, buying after the ex-dividend date and holding long-term is often more profitable, as the intrinsic value remains unchanged.

Hidden Costs Not to Overlook: Taxes, Fees, and Transaction Costs

Besides price fluctuations, participating in dividend-related trading involves hidden costs.

Tax considerations on dividends:

If using tax-advantaged accounts (like IRAs or 401(k)s in the US), you typically don’t pay taxes until withdrawal. In regular taxable accounts, you must pay taxes on dividends received. For example, buying at $35 and dropping to $31 on the ex-dividend date results in an unrealized $4 loss, but you also owe taxes on the dividend income. If you plan to reinvest dividends expecting quick price recovery, buying before the ex-dividend date makes sense.

Transaction fees and tax rates:

In Taiwan, for example, stock trading fees are calculated as: stock price × 0.1425%, multiplied by the brokerage’s discount rate (usually 50-60%). The transaction tax on selling is 0.3% for regular stocks and 0.1% for ETFs, calculated as stock price × tax rate.

Though these costs seem small, they can significantly impact overall returns, especially with frequent trading or small positions.

Diversified Investment Tools: CFD Trading as a Supplement

Besides traditional stock holdings, Contracts for Difference (CFDs) offer another way to participate in the stock market. With CFDs, investors can buy or sell based on price movements, supporting both long and short positions, without owning the underlying stock, thus avoiding dividend taxes.

CFDs are advantageous due to higher capital efficiency; investors can leverage their positions with relatively small margin. If the stock moves as expected, short-term returns can far exceed those from direct stock ownership and dividend collection. For traders aiming to capture short-term volatility around ex-dividend dates, CFDs can be attractive.

However, leverage trading carries higher risks. Investors should assess their risk tolerance carefully and avoid chasing high returns blindly.

Key Takeaway: Holistic Judgment on Buying Before or After the Ex-Dividend Date

In summary, the stock price behavior of dividend-paying stocks on the ex-dividend date is influenced by multiple factors. Investors should consider dividend amounts, market sentiment, company performance, and their own investment goals and risk appetite, rather than assuming the price will always rise or fall before the ex-dividend date.

For long-term holders, high-quality companies may offer better buying opportunities after the ex-dividend date. For short-term traders, more precise analysis of market sentiment and technical support levels is necessary. Will the stock price rise before the ex-dividend date? The answer often depends on how the market perceives the company’s future.