Doesn’t the drop in a stock price after the ex-dividend day cancel out the dividend gain for an investor?

Question

For instance, Volkswagen announced a special dividend payment of €19 in December per share. The share price dropped the next day by €19 as well. So as an investor, I didn’t gain anything (at least in the short term)? I received the dividend but my equity share is worth less that amount.

In: 3

Answer 1

I had this question when I went through my finance class. The way the prof explained it to me is that typically company’s that pay dividends do so in a recurring fashion, so the stock price has it figured in – I.e if the company pays a $1 per share dividend every quarter, they effectively are announcing another $1 dividend immediately after they pay the current one, so the stock never drops.