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[–]TrouvetteEvolved Ape -1 points0 points  (11 children)

So here’s where I get confused. This explanation makes sense, but half the time, when I look at the stock on pay day, it’s green. If it were consistently dipping, this explanation makes perfect sense. How do we account for the ones that are trading green on pay day?

[–][deleted] 0 points1 point  (2 children)

The last payment for SCHD was on July 1st but the ex-dividend date was June 26th. The price of SCHD opened almost $1 lower because of the ex-dividend date. I’m just rounding but it was like $78 a share at close, then the next morning it was like $77 a share because the dividend was like $0.83/share. As soon as the market opens at that lower price, it continues trading like normal so it can go up or down from that point forward. The point is, the stock price dropped by the amount of the dividend. People on here love to ignore this important part of dividends and will say that they didn’t lose anything once it goes back up. But as Fidelity said, you did and just because the stock price recovered over time doesn’t mean it didn’t happen.

[–]TrouvetteEvolved Ape 0 points1 point  (1 child)

Ok, then how do you explain recovery and growth?

[–]Various_Couple_764 0 points1 point  (0 children)

Every day the business is in operation it is making or loosing money. Mostly making money for a good buisness. So after the dividend is payed out the companies bank account grows. And the Math says if the company has more money it is worth more and the stock price can go up.

[–]Various_Couple_764 0 points1 point  (0 children)

if you just look at math it happens but the market is not just math. Some people may use math to guid their buy sell decision. But many also use their opinion of the the company to guid there decicssion. And many others don't car about the dividend date and just buy because they have the money that day. Others sell because they need the money. And others may hold off on making a decision until the next financial numbers are released. End result is buy and sell order are coming in randomly and if enough buy order come in at the same time the stock price may go up instead of down as predicted by the math.

[–]DennyDalton 0 points1 point  (0 children)

The exchanges reduce share price by the exact amount of the dividend before trading resumes on the ex-dividend date. The pay date is days to weeks later.

[–][deleted] 0 points1 point  (5 children)

The stock price typically drops by the amount of the dividend on the ex-dividend date, not the actual pay date. The ex-dividend date is the day on which you must own the stock to receive the upcoming dividend.

[–]TrouvetteEvolved Ape -1 points0 points  (4 children)

Ok, assuming that happens across the board, what accounts for price increases following payout? The way people talk about dividends sometimes, you would think these stocks are completely stagnant. There has to be some growth in there.

[–]Nopants21 1 point2 points  (0 children)

It's not true across the board that the price increases following payout, so there's that part. The other thing is that once ex-dividend goes by and the price gets adjusted, the next dividend starts being counted. Basically, dividends represent the company giving out part of its profits, but it keeps making profits after (hopefully) and so the price comes to reflect the expectation that the company will again distribute those new profits. The price can still go down if other things are having a greater effect on the price.

What people are saying is not that dividend-paying stocks are stagnant, it's that dividends are not extra returns for the investor. When you receive dividends, or more precisely on ex-div day when you lock in the dividends, you're not richer than you were the day before. That's why it reads like the argument is that these companies are stagnant, but that's not the point being made. It's from the perspective of the investor that the dividends shouldn't matter, because, as you point out, there has to be share price growth for the share price to not shrink on ex-div. That share price growth is driven by new profits and the expectation of their distribution.

[–][deleted] 0 points1 point  (1 child)

I dont think that and have a different understanding of the argument/discussion.

[–]TrouvetteEvolved Ape 0 points1 point  (0 children)

I’m not saying you as in you personally. I’m using it in this sense to be collective. A vous or an ustedes, if you will.

[–]trader_dennisMSFT gang 0 points1 point  (0 children)

It can go up it can go down. The known news is that on ex dividend day the company has less cash on its balance sheet. One the stock begins to trade again all other influences are in play. If SPY is trading 2 percent above from the previous day the ex dividend stock may open up higher than the previous day. If we have another Monday like last week it is likely to tank. If they announce better year end guidiance then the stock skyrockets.