Why do stock prices move after dividends? Understand the meaning of dividend filling, how to check, and investment risks in one article

The Meaning of Filling the Dividend Gap: Stock Price Returns to Pre-Dividend Level

Many investors mention the concept of “filling the dividend gap,” but not everyone truly understands its core meaning. In simple terms, filling the dividend gap refers to the process where a company’s stock price recovers to the closing price of the trading day before the dividend was paid.

When listed companies enter the peak dividend season, this phenomenon becomes particularly noticeable. Investors buy stocks before the dividend payout, expecting to receive dividends, but if the stock price fails to rise back to its original level before the dividend, they are effectively obtaining the dividend at a “discounted price.” Only when the stock price fully fills the gap to 100% is the investor considered to have truly received the full dividend entitlement.

The Difference Between Dividends and Stock Dividends and the Price Adjustment Mechanism

Listed companies distribute profits mainly in two forms: cash dividends (配息) and stock dividends (配股). Suppose a stock’s pre-dividend closing price is 100 yuan, with a dividend of 3 yuan per share. After the ex-dividend date, the stock price automatically adjusts to 97 yuan to ensure that shareholders’ total wealth (dividends plus stock value) remains unchanged before and after the dividend.

Subsequently, whether the stock price can rise back to 100 yuan and how long it takes to do so determines whether the gap is filled successfully and how many days it takes. There are generally two methods to calculate the filling days:

Based on the highest price: Observing when the intraday high after the ex-dividend date recovers to the pre-dividend level

Based on the closing price: Tracking when the closing price on trading days rises back to the pre-dividend level

How Fast Is Considered Filling the Gap? Historical Data Tells You the Answer

Investors typically evaluate the speed of filling the gap based on historical data. According to statistics over the past five years in Taiwan stocks, the average time to fill the gap after a stock’s ex-dividend is within 30 days; if more than 4 out of the last 5 times the gap was filled within 10 days, it is considered quite fast.

Comparing the filling speed across different industries reveals clear differences. For example, in the US stock market, during a bull market for tech stocks like Apple (AAPL), the days to fill the rights after dividends in the past two years are mostly single digits; whereas for consumer staples like PepsiCo (PEP), the days are mostly double digits. This reflects market expectations for different industries and companies’ prospects.

It is worth noting that although the US stock market also exhibits the filling phenomenon, it is less frequently discussed, mainly due to the more frequent (usually quarterly) dividend distributions and smaller amounts.

How to Check Filling Days? Practical Operation Guide

To identify stocks that fill the gap promptly, you first need to understand how to check the meaning of filling the gap and the days involved. Common methods include:

Official channels: The “Dividend Policy” page on each listed company’s website

Third-party websites: Professional platforms providing dividend history and gap-filling statistics

• US stocks: Dividend.com, DividendInvestor.com
• Taiwan stocks: CMoney, 財報狗 (Financial Report Dog), etc. (Financial Report Dog offers “Probability of filling within 30 days in the past 5 years” statistics)

For example, on Dividend.com, steps to check Apple (AAPL) filling days are as follows:

1. Enter “AAPL” in the search box at the top right corner to access the stock page
2. Click “Payout” and “View All Payout History” to see historical dividend records and future forecasts
3. In the “Days Taken for Stock Price to Recover” column, view past filling days

Using filtering functions, you can further select stocks with filling days less than 10 days.

Besides checking the days, you should also pay attention to:

Dividend stability: Choose companies with stable historical dividends and continuous profitability, as these are more likely to fill the gap after ex-dividend

Market sentiment: Observe market attitudes toward the company’s future. Optimistic expectations often drive stock prices higher after the dividend

Industry position: Stocks in emerging industries or leading companies tend to be more favored by the market after the dividend

Is a Short Filling Day a Good Investment? Beware of the Psychological Reinforcement Effect

The number of days to fill the gap can reflect the market’s short-term reaction to a company’s prospects, but judging investment value solely based on a short filling days is not advisable. There is an invisible risk here: psychological reinforcement effects.

If a company historically fills the gap quickly, it may trigger market expectations that this will continue, attracting large buy-in and further accelerating the filling process. However, this is merely speculation based on price phenomena and does not guarantee future repetition. When many investors hold the same expectations, it becomes harder to buy at low prices to enjoy the dividend benefit. Conversely, market expectations may push the stock price to rise rapidly after the dividend, increasing the risk of late investors chasing high prices and buying at the top.

What Happens if the Gap Is Not Filled? Short-term Difficulties and Long-term Perspective

If the stock fails to fill the gap, it means the stock price did not recover to the pre-dividend level after the ex-dividend date, and investors have not fully received their dividends. Since dividends are a form of investment return, if the stock price does not fill the gap after the dividend, this return is offset by the decline in stock price, potentially turning the overall investment return negative. This is especially true for short-term investors who need to pay dividend taxes, making losses more apparent.

However, from a long-term perspective, whether the gap is filled or not is just short-term stock price fluctuation. True long-term value investors should not overly focus on whether the stock price fills the dividend gap but should instead concentrate on the company’s earnings potential and growth prospects.

Overall Judgment: Not Relying Solely on Days, Comprehensive Evaluation Is Key

While the concept of filling the gap is simple, it involves complex market expectations and psychological factors. Overall, filling the gap is a characteristic stock price fluctuation phenomenon associated with dividend-paying stocks during each payout. Although the number of days to fill the gap is not a decisive factor in assessing a company’s quality, it can serve as a reference for market sentiment and expectations.

Investors should combine the filling days with the company’s fundamentals, industry trends, and market sentiment for comprehensive analysis and judgment, rather than blindly pursuing the illusion of quick filling. Only then can more rational and long-term investment decisions be made.