Consider a one year period.

In what case would a dividend be distributed by a company, but its share price not rise (other than a sudden fluctuation towards the nearing of the calculation period)?

EDIT: I changed capital gains to share price since I wasn't thinking of the scenario from the point of view of a shareholder, but from that of the company

  • do you mean capital gains from the capital part of the company balance sheet or from the investors' point of view due to hte share price rising? – MD-Tech Jul 3 '18 at 12:03
  • You can edit the title along with the body text. – The Photon Jul 3 '18 at 14:16

You receive a dividend if you hold the shares on the ex-dividend date.

You receive capital gains when you sell the shares at a higher price than what you bought them for.

So if you don't sell the shares you will receive the dividends but not any capital gains.

  • Thanks! However, I was confused between terms. What I meant was, is it possible for (or, rather, has it been seen that) a company's share price has NOT risen, but dividends have been given for a given time period? – rahs Jul 3 '18 at 12:49
  • The price could drop 50% and the company (conceivably) could keep paying dividends. – The Photon Jul 3 '18 at 14:15

In the US, stock exchanges reduce share price by the amount of the dividend on the ex-dividend date. That means that you are effectively receiving a cash flow from your own money in your brokerage account. That dividend is not a profit until share price recovers to the closing price on the day before the ex-dividend date. To add insult to injury, if this occurs in a non sheltered account, you incur a taxable event as well.

Share price rises and falls based on the auction between buyers and sellers every trading day. That is a separate issue from the dividend process.

  • 1
    I don't think this is correct. Stock exchanges don't set prices, buyers and sellers do. A stock's price might fall on the ex-dividend date, but it's perfectly possible that it might rise if there's demand for the stock. – jamesqf Jul 3 '18 at 16:13
  • You're conflating the process of the stock going ex-dividend with the auction that begins when the stock trades after the market opens. – Bob Baerker Jul 3 '18 at 16:26
  • @BobBaerker: I've always been told that the drop in stock price is to due to brokers and automatic triggered trades, by professionals whose valuations of the stock drops due to the outflow of capital inherent in the dividend, rather than a feature of the stock exchange. Do you have any source that states that this is an activity by the stock exchange itself; for example, does the London or Tokyo stock exchange not have these regular, near automatic, post-dividend drops? – sharur Jul 3 '18 at 19:16
  • @sharur - How do the valuation changes by these brokers and professionals cause the stock's price to change? Do they all get together and say, let's drop share price by the some or all of the dividend? Do they determine the outflow of capital and change everyone's orders on the order book? Are day orders and GTC orders altered? What are automatic triggered trades and how do they make the stock's price drop? What's the process? Can you provide some examples of this? – Bob Baerker Jul 3 '18 at 20:34
  • continued... As I stated in my Answer, "In the US, stock exchanges reduce share price by the amount of the dividend on the ex-dividend date". I have no idea how the London or Tokyo stock exchanges handle this. As for my source that this is an activity by the stock exchange itself, all I have is the price of the stock as evidence. I'd say that's pretty conclusive. – Bob Baerker Jul 3 '18 at 20:35

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