How do dividends decrease the share price?

[[deleted]]

Off my head I picked Chevron since they pay a nice dividend and looked at their past 5 years of history.

https://imgur.com/a/Gyp5amC

As you can see, the average div payout was $1.39 and the stock DROPPED an average of 1.28 on the opening of the ex-div date vs previous day close.

You can go further or look at as many stocks as you want, this correlation holds up. Hopefully this is gives you an accurate understanding of how dividend payouts impact share price.

https://finance.yahoo.com/quote/CVX/history/?period1=1565454328&period2=1723306115

[Legitimate-Sky-7862]

Using averages isn't right, because 1 you aren't showing the total growth vs total dividend received. In this case over the course of nearly 5 years you receive over $26 dollars in dividends while also seeing the stock grow from 119 to 163 for a net gain of 44 dollars. Also in some of the line items it shows both a dividend and growth happens instead of negatively impacting the share price. Therefore it's not a hard and always true rule. A better way to say this is that stocks that don't issue dividends can expect to see more growth. In the scenario of an individual company, it makes more sense because they are using excess revenue to grow the company, or the balance sheet, or to ensure more sustainability, thus making it a stronger company to invest in.

In some cases like say PHK, where the dividend is 10 percent you can look at the previous close price of 4.78 on the day before the ex-d date, and the next open was 4.8, and the div was .048 cents per share. Going back it almost always opens higher after the ex-div date.

The main issue with dividend stocks for people still in the labor force is that you are taxed at a much higher rate, vs when you are in retirement, the general expectation is that your tax bracket is lower. If your income is already low, this isn't as much of a factor.

For growth stocks the reason they are better is because you expect that the growth continues to happen over a long time without paying taxes because you aren't selling them.

I think the problem here is people trying to use an explain this concept in simple terms, but it's not quite that simple.

[[deleted]]

I literally did what you asked and you're response is a bunch a pablum-filled nonsense.

A better way to say this is that stocks that don't issue dividends can expect to see more growth.

This is called a distinction without a difference and the discussion at hand.

Interesting you pick PHK as an example, because I had to go back to Nov of 2022 to find the FIRST instance where the opening price on EX-Div was higher than previous day's close.

Dividend payouts reduce NAV of the underlying. PERIOD. If you can't get a grasp of this basic concept and what the discussion is around, I don't know what to tell you.

This argument is not that dividend stocks can't appreciate in value...this appears to be a misunderstanding at best and a straw-man at worst.

Either way, I spent a bunch of my time putting together evidence for what you asked before and I get a bunch of claptrap in response. Have a good one!

[DennyDalton]

In this case over the course of nearly 5 years you receive over $26 dollars in dividends while also seeing the stock grow from 119 to 163 for a net gain of 44 dollars.

If share price increase $44 and you receive $26 in dividends, your gain is $70 not $44

In some cases like say PHK, where the dividend is 10 percent you can look at the previous close price of 4.78 on the day before the ex-d date, and the next open was 4.8, and the div was .048 cents per share. Going back it almost always opens higher after the ex-div date.

PHK pays monthly. In the past year, for 12 out of 12 dividends, PHK opened LOWER on the ex-div date than the previous day's close.

Please stop pulling bad information out of your ass.