The dividend gap: why the price falls and when it closes
beginner
Automated material · TradeAlmanac editorial deskPrepared by a language model from our stored data and checked by an editor.
Содержание · 4
On the first trading day after the record date a share opens lower by roughly the size of the payout.
Why this is not a fall
The company distributed part of its assets. Its value fell by the amount distributed, and the share price reflected that mechanically.
The owner neither lost nor gained: part of the value moved from the price of the security into cash in the account — less tax.
Why it is worse after tax
A dividend is taxed at payment — Tax on dividends: why less arrives than was declared. The price falls by the full amount while less reaches the account. Buying the day before the record date for the payout produces a negative result immediately afterwards.
Closing the gap
The price returning to its earlier level is called closing the gap. The speed depends on the state of the market and on expectations for the business, not on the payout.
The claim that "the gap always closes" is wrong: for a company in decline it never does.
What it changes in selection
Dividend yield is meaningful only alongside the durability of the payout and the prospects of the business — A dividend strategy: income instead of growth, The dividend trap: why a record yield is a bad signal.
Related: How dividends work on the Russian market.
Prepared by a language model from our stored data and checked by an editor.
Model: claude-opus-5
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