If a share price drops on the ex-dividend date, why wouldn’t you wait until then to buy?
You pay less, but you also miss a payment. Count both and the distribution adjustment itself doesn’t put you ahead.
Let’s use HHIS as an example
Suppose an upcoming HHIS distribution is $0.27 per share, and the price just before the ex-dividend date is $11.90. With no other market movement, the price would adjust to $11.63.
This is a hypothetical future payment, not an announced distribution or a price forecast. We assume a $0.27 payment and a $11.90 starting price to illustrate the calculation. Prices can move for other reasons.
Same $1,190. Two ways to buy.
| What you have | Buy before | Buy on ex-date |
|---|---|---|
| Starting cash | $1,190.00 | $1,190.00 |
| Purchase price | $11.90 | $11.63 |
| Shares bought | 100 | 102.3216 |
| Share value at $11.63 | $1,163.00 | $1,190.00 |
| Distribution owed | $27.00 | $0.00 |
| Total value | $1,190.00 | $1,190.00 |
The earlier buyer has fewer shares and a payment coming. The later buyer has more shares and no payment coming. Same total value.
The payment is owed on the ex-date but arrives on the payment date. This example assumes fractional shares and excludes taxes, trading costs, and interest on waiting cash.
Reinvesting the payment
If the earlier buyer reinvests their $27 payment at the assumed $11.63 price, they buy another 2.3216 shares. Both buyers now hold 102.3216 shares.
| What you have | Buy before | Buy on ex-date |
|---|---|---|
| Shares from the purchase | 100 | 102.3216 |
| Shares from reinvesting this payment | 2.3216 | 0 |
| Shares after reinvestment | 102.3216 | 102.3216 |
| Following payment at $0.27 per share | $27.63 | $27.63 |
Actual prices can change before the payment is received and reinvested. Calculations use unrounded fractional shares.
What happens in practice?
The market keeps moving. On the ex-dividend date, HHIS could fall by less than $0.27, fall by more, or even rise. The distribution adjustment is only part of the price change.
The earlier buyer also has to wait until the payment date to receive the $27. By the time they can reinvest that money, the share price could be higher or lower than $11.63. Their $27 could buy fewer or more shares than in our example.
So the two purchases won’t necessarily produce the same result in practice. Holding market movements aside, though, the distribution itself doesn’t give you a clear saving by waiting.
The takeaway
In our example, both buyers end up with the same total value and, after reinvestment, the same number of shares. They receive the same next payment. Adding new money just brings you back to the original question. Repeating the purchase doesn’t create an extra saving.
Sources
- Vanguard: how the distribution adjustment works alongside market movement.
- Investor.gov: buying on the ex-dividend date doesn’t entitle you to the upcoming ordinary cash distribution.
- Harvest: HHIS fund information. HHIS distributions are variable. The amounts and future prices in this post are assumptions.