1. Why must A-share cash dividends be ex-dividend? And U.S. stocks do not ex-dividend?
The ex-dividend after the A-share cash dividend is carried out because the dividend ex-dividend is the company's profit distribution, which makes up for the shareholders' equity by reducing the company's registered capital, thereby adjusting the shareholding ratio between the shareholders and the company. In the A-share market, ex-dividend is to maintain the fairness of the market and protect the interests of investors.
The reason why U.S. stocks do not ex-dividend is that on the one hand, the U.S. stock market pays attention to the fundamental analysis and value investment of the company, and is dominated by institutional investors, who can often rationally evaluate the company's performance and future development potential, without paying too much attention to the specific details of the company's profit distribution. On the other hand, the U.S. stock market focuses on the long-term performance of a company's share price, rather than short-term dividend earnings.
In addition, there are differences in maturity and regulatory policies between the A-share market and the U.S. stock market. The A-share market is relatively new and requires more policy intervention and supervision to regulate market behavior, while the US stock market is relatively mature and pays more attention to market self-regulation and restraint. Therefore, in the A-share market, ex-dividend is to maintain market stability and protect the interests of investors, while in the US stock market, the company pays more attention to long-term value investment and stock price performance, rather than short-term dividend income.
Second, after the cash dividend of A-shares, it must be ex-dividend, how can it be withdrawn to protect investors?
The ex-dividend after the cash dividend of A-shares is to protect the interests of investors, which is embodied in the following aspects:
- Ex-dividend is the company's return to shareholders: the company returns a part of its profits to shareholders through cash dividends, which is the company's return on investment to shareholders and the income that investors deserve. After ex-dividend, the company's share price adjusts accordingly, but the total market value of investors (including cash and shares) remains unchanged.
- Ex-dividend can avoid short-term losses for investors: If the company does not go ex-dividend after cash dividends, it may cause certain losses for short-term investors. Because cash dividends are deducted from the company's registered capital, this will cause the company's stock price to fall, and short-term investors may lose money during the period of holding the stock. After the ex-dividend, the company's stock price is adjusted in accordance with the corresponding proportion, ensuring the short-term interests of investors.
- Ex-dividend helps stabilize the market: In the A-share market, ex-dividend is to maintain market fairness and stability. If the company does not pay ex-dividends after cash dividends, it may lead to unfair competition among investors. At the same time, ex-dividend can prevent investors from using dividends to speculate excessively, thereby stabilizing the market order.
To sum up, the ex-dividend after the A-share cash dividend is to protect the interests of investors, avoid short-term losses of investors, and maintain the fairness and stability of the market.
Third, A-share cash dividends, after ex-dividend treatment, in fact, investors do not receive dividends at all, because dividends are deducted from their own market value, but also subject to tax, such dividends have no meaning. Is it okay to understand it this way?
Your understanding is not correct. The ex-dividend after the A-share cash dividend is to adjust the company's share price to reflect the true value of the company, not to deduct cash from investors.
First of all, dividends are a form of profit distribution of the company, which is the income that investors deserve. In the A-share market, dividends are returned to shareholders in cash after deduction of net assets per share.
Second, ex-dividend is to avoid excessively overvalued or undervalued company shares. If the company's stock price is too high or too low, it will cause the market price to deviate from the actual value, and it will be difficult for investors to make rational investment decisions.
Finally, after ex-dividend, the company's stock price will be adjusted accordingly to reflect the company's net assets and true value. If investors receive cash dividends after holding stocks, although the total market value remains unchanged, investors can get more investment returns by selling stocks or continuing to hold stocks after ex-dividends.
In short, the ex-dividend after the cash dividend of A-shares is to maintain market stability and protect the interests of investors, although investors do not receive cash dividends after ex-dividend, but ex-dividend can avoid investors from suffering losses due to stock price fluctuations, and help investors make rational investment decisions.
4. In this way of ex-dividend, is it a dividend, a second deduction, and a single deduction?
Your observation makes sense. In the A-share market, cash dividends are indeed included in the ex-dividend date, so investors will see a decrease in the market value of their shares on the ex-dividend date, but it is not a secondary deduction.
Specifically, when a company decides to pay cash dividends, a portion of the surplus is distributed to shareholders in cash in accordance with the prescribed procedures and proportions, which is called "dividends". However, since dividends are extracted from the company's surplus, it is actually a distribution of the company's profits, which means that the company's net worth is reduced.
In order to keep the price of the company's stock in line with its net assets and prevent the stock price from being too high or too low due to dividends, the market will adjust the price of the company's shares. This adjustment is called "ex-dividend," and it's actually a price adjustment mechanism designed to keep the company's stock price fair and accurate.
On the ex-dividend date, the company's stock price will be adjusted accordingly according to the amount and proportion of dividends to reflect the reduction of the company's net assets. Therefore, investors will see a decrease in the market value of their shares on the ex-dividend date, but this decrease is only to reflect the reduction in the company's net assets, not to make one dividend and two deductions.
In short, the ex-dividend of cash dividends in the A-share market is to maintain the fairness and accuracy of the company's stock price and prevent the stock price caused by dividends from being too high or too low, and it is not a secondary deduction.
Fifth, why don't U.S. stocks go ex-dividend? Isn't not ex-dividend without guaranteeing the fairness and accuracy of the stock price?
The main reasons why U.S. stocks do not ex-dividend are as follows:
- Company and market maturity: The U.S. stock market is more mature than the A-share market, with a relatively sound corporate governance structure and more rational investors. In this case, the company focuses more on long-term value investment and stock price performance than dividend income in the short term, so there is no need to adjust the stock price through ex-dividend.
- Ex-dividends are not absolutely necessary: in mature markets, investors focus more on a company's fundamentals and future growth potential than on short-term dividend gains. Therefore, ex-dividend is not absolutely necessary, and investors can obtain income in other ways.
- Tax policy: The tax policy of the US stock market is also different from that of the A-share market. In the U.S., investors pay tax on dividends, while in China, investors pay taxes when they sell stocks. This difference in tax policy also results in the US stock market not needing to carry out ex-dividends.
- Investor structure: The investor structure of the U.S. stock market is dominated by institutional investors, who pay more attention to the long-term investment value of the company than to the short-term dividend income. Therefore, institutional investors do not change their investment decisions in the company because of ex-dividends.
In summary, the fact that U.S. stocks do not ex-dividend does not mean that the fairness and accuracy of stock prices are not guaranteed. In mature markets, investors pay more attention to the company's fundamentals and future development potential than to dividends in the short term. At the same time, differences in tax policies and investor structures have also led to the fact that the US stock market does not need to carry out ex-dividends.
6. What will happen if A shares do not ex-dividend?
If A shares do not ex-dividend, it may bring the following effects:
- Stock price fluctuations: When a company declares dividends but does not perform ex-dividend operations, investors will flood in in order to obtain dividend income, resulting in a stock price increase. However, once the dividend is paid, investors have no incentive to continue holding the stock and will choose to sell, causing the stock price to fall. This volatility may affect the stability of the market and investor confidence.
- Investors' choice: If A shares do not go ex-dividend, investors may focus more on short-term investment returns than on the long-term value of the company. This could lead investors to prefer short-term investments rather than long-term holdings of stocks, further exacerbating market volatility.
- Decreased market liquidity: If the stock price is unreasonably overvalued or undervalued, investors may lose confidence in the market, resulting in a decrease in market liquidity. This may affect the proper functioning of the market and investors' investment decisions.
- Company image and investor relations: If a company declares dividends but does not perform ex-dividend operations, it may cause investors to have a negative impression of the company. In addition, if the stock price fluctuates significantly, it may affect the relationship between the company and investors, negatively affecting the company's image and reputation.
In summary, the non-ex-dividend of A-shares will have a series of impacts on the market and the company. In order to avoid these negative effects, the A-share market has adopted a ex-dividend system
7. The ex-dividend treatment of A-shares for so many years has also fluctuated significantly. And how to explain the problem that U.S. stocks do not ex-dividend and do not fluctuate sharply?
What you mentioned is the difference between the two different markets, which can be explained from many aspects such as market maturity, investor structure, policies and regulations.
First of all, there is a difference in the maturity of the A-share market and the US stock market. The A-share market is relatively new, and market participants are mainly retail investors, which makes market sentiment easily affected and stock prices fluctuate greatly. In contrast, the U.S. stock market is more mature, investors are mainly institutional, and pay more attention to the company's fundamentals and long-term value, so the stock price fluctuations are relatively small.
Secondly, the investor structure is also different. Retail investors in the A-share market account for a relatively large proportion, and these investors are more inclined to short-term investment and chase market hot spots, which may lead to greater market volatility. Institutional investors in the U.S. stock market account for a relatively large proportion, these institutional investors pay more attention to the company's long-term value and fundamentals, and investment decisions are relatively more rational, which helps stabilize market volatility.
In addition, there are differences in policies and regulations. The A-share market implements a ex-dividend system aimed at protecting the interests of investors and market stability. However, the implementation of this system is not perfect, and there may be some problems, such as uneven dividends and large stock price fluctuations after ex-dividends. In contrast, the policies and regulations of the US stock market are relatively relaxed, and there is no mandatory ex-dividend, which may lead to relatively little market volatility.
To sum up, although there are fluctuations in both the A-share market and the U.S. stock market, the characteristics shown are not exactly the same. This is mainly due to the difference in the maturity, investor structure, policies and regulations of the two markets.
Since ex-dividend is by no means absolutely necessary, ex-dividend is to reflect the reduction of the company's net assets, is this understanding correct?
Your understanding is not entirely correct. Ex-dividend is not absolutely necessary, but ex-dividend is to adjust the price of a company's stock to reflect the reduction in the company's net assets, and this purpose does exist.
In the A-share market, cash dividends are ex-dividends because dividends will reduce the company's net assets, and the decrease in net assets will affect the company's stock price. By ex-dividend, the price of a company's stock can be adjusted to the correct level to reflect the reduction in the company's net assets, thus avoiding the price of the stock price being too high or too low due to dividends.
In addition, ex-dividend also avoids short-term losses for investors. If the company does not pay ex-dividends after cash dividends, investors may suffer losses due to the decline in stock prices. After the ex-dividend, the company's stock price will be adjusted according to the corresponding proportion, and the total market value of investors (including cash and stocks) will remain unchanged, so as to protect the interests of investors.
In summary, ex-dividend is not absolutely necessary, but its purpose is to adjust the price of the company's stock to reflect the reduction of the company's net assets and to protect the interests of investors. In the A-share market, ex-dividend is necessary to maintain the fairness and stability of the market.
