How to Calculate Stock Price After Dividend
Original post by D. Laverne O'Neal of Demand Media
The day a dividend is approved by a corporation's board of directors, the amount of the dividend becomes a liability in accounting terms. At the end of the trading day, the stock price is adjusted to account for the dividend payout, and the new price is termed the ex-dividend price. The ex-dividend price is the closing stock price reduced by the price per share of the cash dividend. Performing the calculation is relatively straightforward.
Find the price of the stock at the close of the trading day. For example, assume a stock with a price of $50 a share.
Find out the value of the cash dividend paid out. Assume for the purposed of this example, that the per-share cash dividend is $2.
Deduct the dividend amount from the stock's closing price. In this example, $50 minus $2 equals $48. The adjusted price of the stock is $48.
- U.S. Securities and Exchange Commission: Ex-Dividend Dates
- Jacksonville State University: Accounting; Dividends
About the Author
D. Laverne O'Neal, an Ivy League graduate, published her first article in 1997. A former theater, dance and music critic for such publications as the "Oakland Tribune" and Gannett Newspapers, she started her Web-writing career during the dot-com heyday. O'Neal also translates and edits French and Spanish. Her strongest interests are the performing arts, design, health, personal finance and personal growth.