How to Calculate Stock Price After Dividend

By Motley Fool Staff – Updated Apr 23, 2025 at 12:29 PM EST

Key Points

Stock value drops by paid dividend amount, which is more visible in high-dividend companies like REITs.
Company value equals future earnings plus non-operational assets with excess cash included.
On the ex-dividend date, the stock price falls by the dividend's value, affecting buyer's equity.

When a company pays a dividend, the value of the company drops by the amount of the dividend. This fact can be difficult to observe for companies that pay small dividends, but you should be able to clearly see it in companies with big dividend yields, such as real estate investment trusts (REITS).

One way to think about a company's value is that it is equal to the value of earnings in the future plus the value of the assets that aren't needed to run the daily operations.

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Blackboard covered in financial and stock market doodles with the word Dividends in the center. — Image source: Getty Images.

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The logic is as follows:

On Dec. 8, the company trades for $35 per share. The future earnings are worth $30 per share, the soon-to-be paid dividend is worth $4 per share, and the excess cash after the dividend is paid is worth $1 per share.

On Dec. 9, the company will trade for $31 per share. The future earnings are still worth $30 per share, and the excess cash is still worth $1 per share, but anyone who buys the stock on this date or after will not receive the dividend of $4 per share payable on Dec. 11. (In this case, Dec. 9 is known as the ex-dividend date because it is the date at which a buyer of the stock will not receive the dividend. The stock trades at a price excluding the dividend, hence the term "ex-dividend.")

Put simply, on the ex-dividend date, the company is theoretically worth the previous day's closing price minus the upcoming dividend per share.