If on January 2, 2008, a company declares a dividend of $1.50 per share, payable on January 31, 2008, then the price of the stock should drop by approximate $1.50 on January 31.

Question

Quizplus · Accepted Answer

The price of the stock is expected to drop by the amount of the dividend before the market opens on the ex-dividend date, which is typically two business days before the record date (the date by which you must be a shareholder in order to receive the dividend). Therefore, by the time January 31 arrives, the market should have already reflected the drop in price due to the dividend.

If on January 2, 2008, a Company Declares a Dividend