Re: How Dividends Work?
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No, it doesn't come out of the stock price, it comes out of the companies earnings.
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You're both right. The dividends are paid from the company's earnings. However, the market makers do lower the first trade by the amount of the dividend the first trading day after shareholders are eligible for the dividend.
If there was a boring stock that traded at $20 every day, and there was a $1 dividend eligible to shareholders today, tomorrow the stock would open at $19. Normal market fluctuations move this, of course.
-Tom
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