Recently studying high-dividend stocks, I found that many people don't quite understand the ex-dividend date. Actually, the ex-dividend date means the day the company distributes cash dividends, but the stock price usually changes on this day, and how it changes can be quite complicated.

Let's start with a basic concept. When a company decides to pay dividends, the ex-dividend date means that from this day forward, new buyers will not receive this dividend. Many people think the stock price must drop on the ex-dividend date, but that's not always the case. I’ve looked at many examples, like big companies such as Coca-Cola and Apple, where sometimes the stock price actually rises on the ex-dividend date. In 2023, on November 10th, Apple’s stock price rose from $182 to $186 on the ex-dividend day, a pretty noticeable increase.

Theoretically, the logic for a stock price drop is like this: the company pays cash to shareholders, which reduces the company's assets, so the stock price should adjust accordingly. For example, if a stock is priced at $35 and includes $5 in cash reserves, and the company decides to pay $4 in cash dividends, then theoretically, the stock price should drop from $35 to $31 on the ex-dividend date. But in reality, things are often more complex because stock prices are also influenced by market sentiment, company performance, industry outlook, and other factors.

Regarding whether buying stocks on the ex-dividend date is worthwhile, I think it depends on three aspects. First, whether the stock price has already risen significantly before the ex-dividend date. If it’s already high, some investors might sell in advance, making the entry riskier. Second, look at the historical trend: does this stock usually rise or fall after the ex-dividend date? This is very important for short-term traders. Third, and most importantly, is the company's fundamental health.

This involves two concepts called “fill the rights” and “stick the rights.” Filling the rights means the stock price recovers after the ex-dividend date, indicating investors are optimistic about the company's prospects. Sticking the rights means the stock price hasn't recovered, usually suggesting investors have doubts about the company's future. For industry leaders like Walmart and Johnson & Johnson, they often fill the rights after the ex-dividend date because the company's intrinsic value hasn't decreased; the price drop is just a temporary adjustment. If you're a long-term investor, buying these companies after the ex-dividend date at a lower price can be a good way to acquire quality assets more cheaply.

But be aware that ex-dividend also involves tax and transaction fee considerations. If you buy stocks in a regular taxable account, you not only have to pay taxes on dividends but also face unrealized losses from stock price declines. For example, in Taiwan’s stock market, transaction fees are about 0.1425% of the stock price times the discount rate, and when selling, you also pay a 0.3% transaction tax. These costs can significantly reduce the profit margin for short-term trading.

Therefore, I believe that if you want to make quick money from the volatility around the ex-dividend date, the risks are quite high. But if you believe in a company's long-term prospects, buying after the ex-dividend price correction might actually be a good opportunity. The key is to understand what the ex-dividend date means, grasp the principles of stock price adjustments, and then make decisions based on the company's fundamentals and your own investment goals.