## Suddenly Increasing Stock Quantity After Receiving Dividends? What's Going On

Investors in stocks often have this question: when a company announces a dividend payout, the number of stocks in their account inexplicably increases, while the stock price drops. No money has come in, yet the stock count increases—how should this be accounted for?

In fact, when a listed company distributes dividends, it is returning the profits earned to shareholders. There are two ways to do this—**direct cash payments (cash dividends) or directly issuing additional stocks (stock dividends)**—each with its own mechanisms.

## What's the Difference Between Stock Dividends and Cash Dividends?

**Stock dividends mean the company gives you free shares.** For example, if you hold 1000 shares of a company, and the company decides to distribute 1 share for every 10 shares held, you will receive an additional 100 shares, and your stock count will go from 1000 to 1100.

But there's a key point—**how many shares is 1 yuan of stock dividend worth?** This depends on the company's distribution ratio. The distribution ratio is set by the company and varies. For example, in the above case, 1 yuan of stock dividend equals 0.1 shares; 10 times that would be 1 share.

**Cash dividends are straightforward— the company pays money directly into your account.** Similarly, if you hold 1000 shares and the dividend is 5.2 yuan per share, you'll receive 5200 yuan in cash. Of course, tax authorities will take a cut—say 5%—so the actual amount received is about 4940 yuan.

For investors, most prefer cash dividends because:
- The money is in hand, and they can decide what to buy
- Their ownership isn't diluted by new shares
- But they have to pay taxes, and over time, the tax rate may decrease

For companies, paying cash dividends requires sufficient cash flow. Stock dividends are simpler—they can be issued as long as the distribution conditions are met, even without cash on hand.

## Why Does the Stock Price Drop on the Dividend Distribution Date?

This is the most confusing part. Clearly, paying dividends is a good thing for the company, so why does the stock price fall?

The root cause lies in **ex-dividend and ex-rights**:

**Ex-dividend** occurs when cash dividends are paid out. The company's net assets decrease (since cash is paid out), so the value per share naturally drops, and the stock price adjusts accordingly. For example, if the stock price on the record date is 66 yuan, and a 10 yuan cash dividend is paid per share, the theoretical price after ex-dividend is 66 - 10 = 56 yuan.

**Ex-rights** happen when stock dividends are issued. The company's total shares increase (more stocks issued), but the total market value remains unchanged, so the value per share is diluted. The formula is: Ex-rights price = closing price on record date ÷ (1 + distribution ratio). For example, if the stock price is 66 yuan and the company issues 1 share for every 10 shares (distribution ratio 0.1), the ex-rights price becomes 66 ÷ 1.1 ≈ 60 yuan.

**What if both cash and stock dividends are paid simultaneously?** Then it's a mixed adjustment: (closing price on record date - cash dividend) ÷ (1 + distribution ratio). For example, 66 yuan with a 1 yuan cash dividend and 0.1 distribution ratio results in (66 - 1) ÷ 1.1 ≈ 59.1 yuan.

While the stock price drops, it might seem like a loss, but this is a mathematical adjustment; your total asset value remains unchanged. It's like exchanging 1 yuan banknote for ten 1-jiao coins—the number of coins increases, but the total value stays the same.

## Will the Stock Price Rise Back After Ex-dividend?

This is what investors care most about. If the stock price recovers to the pre-dividend level, it's called **price and dividend recovery**; if it continues to fall, it's called **price and dividend discounting**.

The logic behind recovery is: paying dividends signals good company development, leading investors to be optimistic about future prospects and willing to buy at lower prices, pushing the stock price up. Conversely, if the company's performance deteriorates, the stock price may continue to decline after ex-dividend.

**In the long run, the returns from stock appreciation far outweigh the dividends paid.** For growth companies, not paying dividends can still generate returns through stock price increases. Dividends are more common in mature companies, suitable for conservative investors seeking stable cash flow.

## Which Should I Choose?

**Cash dividends are suitable for short-term investors**—they realize immediate gains and can cash out, but taxes apply.

**Stock dividends suit long-term investors**—they benefit from compound growth, as the number of shares increases, and future dividends grow accordingly, provided the company continues to perform well.

There's also a third option—**some companies do not pay dividends but instead buy back their own shares**. Share repurchases reduce the number of shares in circulation, increasing the net asset value per share, creating value for investors.

## How to Check a Company's Dividend Plan?

Dividend payments require approval at the shareholders' meeting and are disclosed in financial reports. Investors can:
- Visit the company's official website for dividend announcements and historical records
- Check the stock exchange's official website for ex-dividend and ex-rights notices and calculation tables (for Taiwan investors, on the Taiwan Stock Exchange website)
- Generally, dividends are paid within 2-4 months after the announcement, depending on when the company discloses its financial report

Dividends are a way for companies to reward shareholders, but not the only way. Good companies enable shareholders to benefit through both stock appreciation and dividends; poor companies may pay dividends but still see their stock decline. The most important thing in investing is choosing the right company.