How much are stock dividends really worth? What do 1 yuan and 0.5 yuan truly represent?

Investors interested in stocks often can’t avoid one topic: dividends. Watching their stock accounts unexpectedly grow with more stocks or cash each year, many wonder—are they truly earning money, or is the company just “performing magic”? Today, let’s clarify the ins and outs of stock dividends.

Two Ways of Distributing Dividends: Stock vs. Cash

When a listed company makes a profit, after paying off debts and covering previous losses, how should the remaining profit be distributed? There are two options:

One way is to give stocks—this is called stock dividends or bonus shares. For example, if the company decides to issue 1 new share for every 10 shares held, and you own 1000 shares, you will receive 100 new shares for free, increasing your total stock holdings. But don’t celebrate too early; there’s a trick here.

The other way is to give cash—this is called cash dividends or payouts. The company directly deposits money into your account, which is cash in hand. But there’s a “cost”—you need to pay personal income tax.

The choice of which method to use depends on the company’s “pocketbook.” Paying cash dividends requires the company to have real cash on hand and to ensure that daily operations are unaffected after distribution. In contrast, issuing stock dividends has a lower threshold—so long as the distribution criteria are met, even if cash is tight, it can still be done.

How Much Is 1 Yuan of Stock Dividend? Let’s Talk Numbers

This is the most common question. But actually, the term “1 yuan stock dividend” isn’t very accurate. Usually, companies specify dividends as “distributing 1 share for every 10 shares” or “paying 0.5 yuan cash”—more precise descriptions.

Let’s clarify with real examples:

Scenario 1: Pure Stock Dividend
A company decides to issue 1 new share for every 10 shares held. If you own 1000 shares, you will receive (1000 ÷ 10) × 1 = 100 shares, and your total shares will increase to 1100.

Scenario 2: Pure Cash Dividend
A company pays 5.2 yuan cash per share. If you hold 1000 shares, you will receive 1000 × 5.2 = 5200 yuan. After deducting 5% income tax, the actual amount received is 5200 × 0.95 = 4940 yuan.

Scenario 3: Mixed Dividends
The most complex but also most common—both stock and cash dividends are paid. For example, 1 share for every 10 shares plus 4 yuan cash per share. An investor holding 1000 shares ends up with 100 new shares plus 4000 yuan cash.

The key point here is: the amount of dividends is proportional to your holdings—the more shares you own, the more you receive.

Dividend Distribution Schedule: After Financial Reports

When do listed companies pay dividends? Generally, Taiwan stocks tend to pay annual dividends, while US stocks prefer quarterly payouts. The payout timing usually follows after the financial report is released.

The process typically is:

Announcement Date—the company announces the dividend plan
Record Date—confirms which shareholders are eligible for the dividend; holding shares before (or on) this date counts
Ex-Dividend Date—usually the trading day after the record date; shares bought on this day or later do not receive this period’s dividend
Distribution Date—the date when money or stocks are actually credited to investors’ accounts

Note that not all profitable companies pay dividends every year. If a company has large investment plans or expansion needs, it may reduce or cancel dividends even if it has profits.

What Exactly Are Ex-Dividend and Ex-Rights?

After dividends are paid, the stock price usually drops significantly. This isn’t bad; it’s a natural mathematical adjustment.

If the dividend is cash, the company’s total net assets decrease, and the value per share drops accordingly—this is called ex-dividend. The calculation is:

Ex-dividend Price = Closing Price on Record Date - Dividend per Share

For example, if Company A’s closing price on the record date is 66 yuan, and it pays a 10 yuan dividend, the next day’s ex-dividend price is 66 - 10 = 56 yuan.

If the dividend is stock, the company’s total shares increase, but its total market value remains unchanged. The value per share is diluted, and the stock price drops—this is called ex-rights. The formula is:

Ex-rights Price = Closing Price on Record Date ÷ (1 + Rights Issue Rate)

For example, if Company A issues 1 new share for every 10 shares (rights issue rate 0.1), and the record date closing price is 66 yuan, the ex-rights price is 66 ÷ (1 + 0.1) = 60 yuan.

If both cash and stock are distributed simultaneously, both adjustments happen together:

Ex-rights and ex-dividend Price = (Closing Price on Record Date - Cash Dividend per Share) ÷ (1 + Rights Issue Rate)(

Will the Stock Price Rise or Fall After Dividends? It Depends on “Filling the Gap”

This is the most concerned question for investors. After dividends cause the stock price to drop, what happens next?

If the dividend signals positive news—steady company performance and good development—investors will be optimistic about its prospects. When the stock becomes “cheaper,” investors tend to buy, pushing the price back up. If the price eventually recovers to the level before the ex-dividend/ex-rights date, this is called “filling the gap” or “filling the dividend”.

Conversely, if the stock price continues to decline after the dividend and doesn’t return to the original level, it’s called “underfilling” or “under-earning”—which isn’t favorable for investors.

Whether the price fills the gap after ex-dividend/ex-rights depends on market perception of the company’s future, not the dividend itself.

Which Is More Beneficial for Investors: Stock Dividends or Cash Dividends?

This is a subjective question, but data speaks.

Advantages of cash dividends: Investors receive real cash immediately, which they can reinvest or use freely. Also, cash dividends do not increase the number of shares, avoiding dilution of shareholder equity.

Disadvantages of cash dividends: They are subject to personal income tax; the shorter the holding period, the higher the tax rate. From the company’s perspective, large cash payouts can weaken liquidity and limit expansion plans.

Advantages of stock dividends: No tax payable at the time of receipt, and in the long run, if the company performs well, stock appreciation yields returns that far exceed the dividend itself. For long-term investors, this is the start of “compound interest”—the newly issued shares also pay dividends, creating a snowball effect.

Disadvantages of stock dividends: No immediate cash; returns depend on future stock price increases. In the short term, the increase in total shares can seem like “dilution,” which isn’t as straightforward as cash dividends.

In simple terms: if you want stable cash income, choose cash dividends; if you aim for long-term growth, choose stock dividends.

How to Check Dividend Information?

Want to learn about a stock’s dividend history and future plans? Several channels:

Company Website—Most listed companies publish dividend announcements and historical records on their investor relations pages; this is the most detailed source.

Stock Exchange—For example, in Taiwan, log into the Taiwan Stock Exchange website, where you can find ex-dividend and ex-rights notices and calculation tables. These tables, dating from May 5, 2003 (Minguo 92), record complete dividend data for each company.

Trading Software—Most brokerage trading platforms display dividend information and payout dates on stock detail pages, making it very convenient.

Dividends are a way for companies to reward shareholders, but they are not the only way. Some companies choose not to pay dividends but instead use stock splits (dividing 1 share into multiple shares to lower the price and attract investors) or share buybacks (the company repurchasing its own shares to reduce total shares and increase per-share value). Ultimately, the choice depends on the company’s strategic layout and market environment.