Income Investing Results - February 2026

[Lorenzo]

With stocks and ETFs, it's more complicated. The exchanges and brokerages will mechanically lower the listed share price on the ex-dividend date. But that's just an artificial beginning.

Once trading starts, all bets are off. Market demand, world news, company/industry news, and what I call "price memory" take over and the results are totally unpredictable. At the end, it's impossible to tie that day's closing price, not to mention the price on subsequent days, to any permanent impact of the dividend. If it were a rigorous science experiment, it would not be possible to conclude any degree of causation.

And yet, that is exactly what anti-dividend folks claim to be the case. Hence the frustration some of us experience.

By "price memory" I'm referring to the collective awareness that investors who frequently watch and trade a particular asset maintain about its price range. They know its 52 week highs and lows, they know where it's been last week or last month, and they have their own personal entry and exit points. These factors cause the drop on ex-date to be quickly absorbed by other factors.

I have no horse in this race, so I ask with total neutrality and some naivety whether there have been scholarly studies of the behavior of prices ex-dividend? I would be willing to bet that economists have looked into this and there are published papers out there.

 

[Flieger]

FYI. There is a March thread.

Yes. Let's move there!

Flieger

 

[ERD50]

RE, a div payout's effect on stock price...

... Once trading starts, all bets are off. Market demand, world news, company/industry news, and what I call "price memory" take over and the results are totally unpredictable. At the end, it's impossible to tie that day's closing price, not to mention the price on subsequent days, to any permanent impact of the dividend. If it were a rigorous science experiment, it would not be possible to conclude any degree of causation. ...

Sure, there are other forces at play that move stocks every day. So it is buried in some noise.

But if $100 stock pays a $2 div in Q1, that $2 is gone, forever. How can it be otherwise? That's a permanent impact.

If other market forces bring that stock back to $100 from $98 ex-div, it would have been at $102 w/o the $2 it distributed. It's arithmetic.

As I recall, there was an academic study that showed this, take enough comparisons, and the noise cancels out. I'll see if I can find it.

 

[Lorenzo]

As I recall, there was an academic study that showed this, take enough comparisons, and the noise cancels out. I'll see if I can find it.

That would be an interesting read if you can find it. I suspect the issue has been the subject of more than one such paper.