Recently, many people have asked me a question: Do stock prices always fall on the ex-dividend date? Should I buy stocks before or after the ex-dividend date? Honestly, this question has troubled many beginners who want to earn stable income from high-dividend stocks.

Let me start with the conclusion: stock prices do not necessarily fall on the ex-dividend date. Many people believe that stock prices must drop on the day of the dividend, but this is actually a misconception.

Let's look at the principle. When a stock goes ex-dividend, the company distributes cash dividends or new shares to shareholders. In theory, the company's total value remains unchanged, but the value represented by each share decreases accordingly, so the stock price is adjusted downward. It sounds logical that the price should fall, but the actual situation is much more complex.

For example, suppose a company earns $3 per share annually, and the market values it at a 10x P/E ratio, so each share is worth $30. This company has been profitable for years and has accumulated a lot of cash, say $5 per share. So, the total valuation of the company is $35 per share.

The company decides to pay out $4 per share in cash dividends, keeping only $1 as reserve. On the ex-dividend date, theoretically, the stock price should drop from $35 to $31. But this is just a theory.

Looking back at history, we find that the stock price performance on the ex-dividend date can vary greatly. Coca-Cola, a major dividend payer, pays quarterly dividends. In 2023, its two ex-dividend dates saw slight increases, but in 2025, its two ex-dividend dates experienced slight declines. Apple is even more interesting; the last ex-dividend date saw its stock price rise by 6.18%. Leading stocks like Walmart, Pepsi, and Johnson & Johnson also often see stock price increases 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 also play roles. When a fundamentally solid company pays dividends, investors often view its future positively and may buy more during the price adjustment.

So, is it worthwhile to buy stocks after the ex-dividend date? That depends on the specific situation.

First, look at the stock price performance before the ex-dividend date. If the price has already risen to a high level, many investors might take profits early, especially those seeking tax advantages. Entering the market at this point may not be wise, as the stock price has already priced in too many expectations.

Second, consider historical trends. Statistics show that stocks tend to decline more often than rise after the ex-dividend date. Short-term traders should be cautious, as the risk of losses after buying is relatively high. However, if the stock price falls to a technical support level and begins to stabilize, that could be a good buying opportunity.

Most importantly, consider the company's fundamentals. For industry leaders with solid fundamentals, the ex-dividend adjustment is just part of the stock price correction, not a reduction in value. Buying such companies after the ex-dividend date and holding long-term is often more profitable because the intrinsic value remains unchanged, and the price pullback can make the stock more attractive.

However, be aware of hidden costs. If you buy ex-dividend stocks in a regular taxable account, you'll face a double hit: unrealized capital losses and taxes on received dividends. In Taiwan's stock market, you also need to consider transaction fees and trading taxes. The fee is 0.1425% of the stock price (discounted), and the standard stock trading tax is 0.3%, while ETFs are taxed at 0.1%. These costs can eat into short-term trading profits, reducing the potential gains.

In summary, stock price performance on the ex-dividend date is influenced by many factors and is not necessarily a drop. Investors should consider the company's fundamentals, their investment horizon, and risk tolerance. For high-quality companies with long-term potential, the ex-dividend date might even be a good opportunity to add positions. But for short-term trading, the risks are higher, requiring more cautious strategies and strict risk management.