How to use this calculator
- Closing price: the stock’s last price on the trading day before the ex-date.
- Dividend per share: the single payment going ex, not the yearly total.
- Tax rate: optional. Your rate on this dividend if the shares are in a taxable account.
The formula
Expected open = Closing price − Dividend
Drop % = Dividend ÷ Closing price × 100
Dividend after tax = Dividend × (1 − Tax rate)
Net per share = Dividend after tax − Dividend
The net figure is what a shareholder gains or loses overnight from the dividend alone: the price falls by the full dividend, but you only keep the after-tax part. With no tax, the two cancel out and the net is zero.
Worked example
The starting numbers: a stock closes at $50.00 the day before it goes ex-dividend on a $0.50 payment, and you pay 15% tax on dividends.
- Expected open: $50.00 − $0.50 = $49.50.
- Drop: $0.50 ÷ $50.00 × 100 = 1.00%.
- Dividend after tax: $0.50 × 0.85 = $0.425.
- Net per share: $0.425 − $0.50 = -$0.075.
On 200 shares, that’s a $100.00 drop in the value of your position, $85.00 you keep from the dividend, and a net of -$15.00 once tax is counted.
Why the price drops
A dividend is cash leaving the company. The day before the ex-date, a share includes the right to that cash. On the ex-date it doesn’t anymore, because buyers from that day on won’t receive the payment. So the share is worth about the dividend less. Nothing is lost for an existing holder: the value moves from the share price into the dividend that arrives on the pay date.
On most days the dividend is small next to the stock’s normal daily swings. A $0.50 dividend on a $50 stock is a 1% drop, and a stock can easily move 1% for other reasons by lunchtime. For that reason you won’t always see the drop clearly on a chart.
Why “dividend capture” rarely adds up
Dividend capture means buying just before the ex-date to collect the dividend, then selling soon after. On paper it looks like free money. In practice the price drop takes back about what the dividend adds, and three things push the result below zero:
- Tax. To be qualified, a dividend needs the shares held more than 60 days in the 121-day window around the ex-date. A quick trade fails that test, so the dividend is taxed at your ordinary income rate.
- Trading costs. Even with no commission, you pay the gap between the buy and sell prices twice.
- Price risk. The stock can fall further than the dividend while you hold it.
To check which day you have to buy by to get a dividend at all, use Will I Get the Dividend?
Why charts sometimes hide the drop
Many price charts show “adjusted” prices, which shift all the prices before each ex-date down by the dividend so the line looks smooth. That’s useful for measuring total return, but it means the drop on the ex-date won’t appear. To see it, look for the unadjusted closing price, often labeled “Close” rather than “Adj. close”.
Large special dividends
For a one-time dividend of 25% or more of the share price, the ex-date is set for the business day after the pay date instead of the usual day. The price drop is then large and easy to see, and the same formula still applies.
Tip: in an IRA or 401(k), set the tax rate to 0. The net effect is then zero: the drop and the dividend cancel out exactly. To see what a dividend is worth in different accounts, try the After-Tax Dividend Calculator.