2
$\begingroup$

I am trying to understand why a stock experienced a very drastic drop in price. The only event linked to the drop seems to be payment of an unusually big dividend; however its effect on the price seems too strong to fully explain it.

The company is in good shape and has a good quick ratio; the assets are much higher than the dividend.

$\endgroup$
  • 1
    $\begingroup$ If the company transfers a huge amount of their cash to their stock-holders, why would you expect the company value not to change? $\endgroup$ – Joshua Ulrich Aug 10 '14 at 17:27
  • $\begingroup$ Indeed, if the stock value wouldn't decrease value would be created out of nowhere. $\endgroup$ – Bob Jansen Aug 10 '14 at 17:37
  • 1
    $\begingroup$ The dividend is 9%, the stock price dropped by more than a half, cash flow wise this (to me) seems unusual. $\endgroup$ – A.L. Verminburger Aug 10 '14 at 17:59
  • $\begingroup$ 9% of what? Can you give us the name of the stock? Without more information the drop in market cap should be equal to the amount of dividends. $\endgroup$ – Bob Jansen Aug 10 '14 at 18:29
  • 1
    $\begingroup$ @emcor I agree that it could be an interesting empirical question if the question is not just "why do dividends decrease stock price" and I'm happy to reopen. In that case, we need more info because if you want take the empirical approach it is almost unanswerable in the current form. $\endgroup$ – Bob Jansen Aug 10 '14 at 20:26

Browse other questions tagged or ask your own question.