If on January 3, 2011, a company declares a dividend of $1.50 per share, payable on January 31, 2011, to holders of record on January 19, then the price of the stock should drop by approximately $1.50 on January 17, which is the ex-dividend date.

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Quizplus · Accepted Answer

This is because on the ex-dividend date, all buyers of the stock will no longer be entitled to receive the dividend payment, and therefore the price of the stock will adjust downwards to reflect the value of the dividend that has been paid out.

If on January 3, 2011, a Company Declares a Dividend