Recently, many novice investors have a common concern regarding high-dividend stocks—will the stock price necessarily drop on the ex-dividend date? Is buying after the ex-dividend date really more cost-effective?

Actually, this question is a bit more complicated than many people think. To start with the conclusion: a stock price decline on the ex-dividend date is not an inevitable event.

In theory, the stock price should decrease on the ex-dividend date. Imagine a company with a stock value of $35 per share, which includes $5 in cash reserves. If the company decides to distribute $4 in cash dividends to shareholders, then theoretically, the stock price should adjust from $35 to $31 on the ex-dividend date. This logic is straightforward—the company's assets decrease, so the stock price should reflect this change.

But in reality, things are often different. I looked at historical data: blue-chip stocks like Coca-Cola sometimes see their prices slightly rise on the ex-dividend date. Even more extreme, Apple on November 10, 2023, saw its stock price jump from $182 to $186 on the ex-dividend date. Industry leaders like Walmart and Johnson & Johnson also often see their stock prices increase on the ex-dividend date. Why? Because stock price movements are influenced by more than just dividends; market sentiment, company performance, and overall market conditions all play a role.

So, is buying after the ex-dividend date more cost-effective? It depends on several factors. First, look at the stock's performance before the ex-dividend date—if the stock has already risen significantly, many investors might take profits early. In that case, buying afterward might not be the best timing, as the stock price could have already priced in expectations.

Next, observe the historical trend. Statistically, stocks tend to continue declining after the ex-dividend date rather than rebound, which is not very friendly for short-term traders. However, if the stock price stabilizes at a technical support level, that could actually be a good buying signal.

Most importantly, consider the company's fundamentals. For stable, industry-leading companies, the ex-dividend adjustment is just a technical correction and does not mean the company's value has shrunk. In such cases, buying after the ex-dividend date can be an opportunity—buying quality assets at a lower price. If you plan to hold these stocks long-term, entering after the ex-dividend date is usually more cost-effective.

Also, be aware of hidden costs. If you use a regular taxable account, buying before the ex-dividend date and receiving the dividend can hit you with two disadvantages: unrealized capital losses plus dividend taxes. But if you use tax-deferred accounts like an IRA or 401(k), you don't need to worry about that. Additionally, transaction fees and trading taxes apply: in Taiwan, the trading fee is 0.1425% of the stock price times the discount rate, and the selling transaction tax is 0.3% for regular stocks or 0.1% for ETFs. These costs should be factored into your calculations.

Overall, whether buying after the ex-dividend date is cost-effective depends on how you view the company's future. For high-quality companies you plan to hold long-term, the stock price adjustment after the ex-dividend date can be an opportunity to add to your position. If you're only aiming for short-term gains, the risks are higher. The most rational approach is to combine an analysis of the company's fundamentals, your investment goals, and your risk tolerance, rather than blindly following the crowd.