Recently, many people have been debating a question: Is it really worthwhile to buy stocks on the ex-dividend date? I’ve also thought about this issue myself, so today I want to share my understanding.

First, to conclude, a stock price decline on the ex-dividend date is not actually inevitable. Many people believe that the stock price must drop on the ex-dividend date, but in reality, the market is much more complex. I’ve seen several leading stocks, like Coca-Cola and Apple, actually rise on their ex-dividend dates. For example, in November 2023, Apple’s stock price increased from $182 to $186 on the ex-dividend date, a pretty noticeable gain. So, the benefits of ex-dividends are not just about receiving dividends; choosing the right timing to buy can also allow investors to benefit from a rebound in stock prices.

Why is this the case? Simply put, the price movement on the ex-dividend date is influenced by many factors. Theoretically, the stock price should adjust after the dividend is paid—for example, if a company’s per-share value is $35 and it pays a $4 dividend, the theoretical price after the ex-dividend date would be $31. But in practice, the actual stock price depends on market sentiment, company performance, investor expectations, and more. Stable companies with solid earnings and consistent dividends are usually favored by investors for their future prospects, so even if the stock price adjusts in the short term, it often recovers quickly.

There’s an important concept called “price recovery after dividend adjustment,” or “fill the rights and dividends.” Simply put, it means that after the stock goes ex-dividend, its price temporarily drops, but then it bounces back. This indicates that investors are optimistic about the company’s outlook. Conversely, if the stock price doesn’t rise back up, it’s called “sticking at the rights and dividends,” which usually suggests that investors have concerns about the company’s future.

So, is it worthwhile to buy stocks after the ex-dividend date? I think it depends on the situation. First, look at how the stock was performing before the ex-dividend date. If the stock price has already risen to a high level, many investors might choose to lock in profits early, so entering at that point may not be ideal because expectations are already priced in. But if the stock price continues to decline after the ex-dividend date, reaching a technical support level and stabilizing, that could actually be a good buying opportunity.

For fundamentally solid companies, the ex-dividend date can be an opportunity. Many people see dividends as a negative signal, but that’s not necessarily true. The intrinsic value of these leading companies doesn’t decrease just because they pay dividends. In fact, a price correction might allow you to buy quality assets at a lower price. Holding such stocks long-term, the benefits of dividends will gradually materialize. High-dividend stocks attract investors like Warren Buffett because they often represent stable cash flow and healthy business models.

However, be aware of hidden costs. If you buy ex-dividend stocks in a regular taxable account, you not only face unrealized losses from the stock price decline but also have to pay taxes on the dividends received. Additionally, there are transaction fees and taxes. For example, in Taiwan’s stock market, the trading fee is about 0.1425% of the transaction amount (after discounts), and a 0.3% transaction tax applies when selling. These costs add up, and short-term traders should consider them carefully.

My advice is, if you are a long-term investor confident in a company’s fundamentals, buying around the ex-dividend date can be a good opportunity. But if you’re a short-term trader aiming to profit from fluctuations before and after the dividend date, you need to be more cautious with timing. In summary, the benefits of ex-dividends do exist, but only if you understand market logic rather than blindly following the crowd.