Recently, I’ve been pondering a question: many people focus on high-dividend stocks, but whether to buy before or after the ex-dividend date is still confusing. Honestly, this is a good question because the answer isn’t as simple as you might think.

First, the conclusion: stock prices don’t necessarily fall on the ex-dividend date. I’ve seen too many people trapped by this misconception. Theoretically, stock prices should drop because of the dividend payout, but in reality, market performance often differs. Leading stocks like Apple and Coca-Cola often rise on the ex-dividend date. Why? Because stock prices are influenced not just by dividends, but also by market sentiment, company performance, and overall economic conditions.

I remember on November 10, 2023, Apple’s ex-dividend date, the stock price rose from $182 to $186, a significant increase. Blue-chip stocks like Walmart and Johnson & Johnson also often see gains on the ex-dividend date. So, saying stock prices must fall on the ex-dividend date? That’s definitely an outdated idea.

So, is it worthwhile to buy stocks after the ex-dividend date? That depends on your strategy. There’s an important concept called “dividend recovery” and “dividend shortfall.” Dividend recovery means that although the stock price drops temporarily after the ex-dividend date, it gradually recovers and may even return to pre-dividend levels, indicating market confidence in the company’s prospects. Dividend shortfall means the stock price doesn’t recover, suggesting investors have doubts about the company’s future.

If a company has solid fundamentals and is a leader in its industry, the ex-dividend adjustment is just part of the stock’s price correction and doesn’t reflect a decrease in company value. In fact, you might get a chance to buy quality assets at a lower price. But if the stock price was already high before the dividend, many investors might choose to sell early to avoid taxes. In that case, entering the market requires caution.

Another practical issue is taxes and transaction fees. If you use a regular taxable account, dividends received on the ex-dividend date are taxable, and you might also face unrealized capital losses. In Taiwan stocks, transaction fees are about 0.1425% of the stock price times the discount rate; trading tax for regular stocks is 0.3%, and for ETFs, 0.1%. These costs add up, making short-term trading less profitable.

Therefore, my view is: if you’re a long-term investor optimistic about the company’s prospects, a price dip after the ex-dividend date can be an opportunity to buy more. But if you’re aiming to profit from short-term fluctuations, be especially aware of what happens if the dividend isn’t filled—stock prices might continue to decline, increasing your risk of loss.

Some people consider using contracts for difference (CFDs) to speculate on short-term movements before and after the ex-dividend date. This way, they don’t need to hold actual shares or pay dividend taxes, just predict the right direction to profit. However, leverage risks are high with this approach, so it should be based on your risk tolerance.

In summary, whether to buy stocks on the ex-dividend date depends on the company’s strength, your investment horizon, and your tax and cost considerations. Don’t be scared off by the surface phenomenon of stock price drops on the ex-dividend date; sometimes, it’s a good opportunity to pick up bargains.