We decided to dive deep into price development on ex-date and put it in perspective – by comparing it to actual DY for each blue chip in Croatia & Slovenia.

Investing in the stock market offers various avenues for generating income with dividends playing a crucial role in this regard. When it comes to dividend-paying stocks, understanding the dynamics between price development and dividend yield is essential for investors. In this blog, we will delve into a comparative analysis of the Croatian & Slovenian blue chips, focusing on the relationship between price fluctuations around the ex-dividend date and the corresponding dividend yield. By analyzing data from the period 2020-2022, interesting insights emerge. For this, we focused on CROBEX10 and SBITOP constituents for the given period. The main objective was to understand the variance between the decrease in share price and the dividend yield.

Deviation from prices changes on ex-date (%) compared to DY

Source: Bloomberg, InterCapital Research

Croatian Market Insights

In Croatia, the data indicated that, on average, CROBEX10 constituents experienced a decrease in share price that was 0.3 percentage points less than the corresponding dividend yield. This finding suggests that the market participants exhibited a relatively modest reaction to the ex-dividend date, with share prices adjusting to a slightly lesser extent compared to the dividend yield. This implies that investors in Croatia, on average, were willing to hold onto their positions in dividend-paying stocks despite the ex-dividend date approaching. It is worth noting that individual stock behavior within the CROBEX10 index may have varied, warranting further scrutiny on a case-by-case basis as always.

Slovenian Market Findings

In Slovenia, the results showcased a more pronounced trend compared to Croatia. On average, the decrease in share price was 2.1 percentage points less than the dividend yield. This disparity suggests that Slovenian investors displayed a greater resilience to price fluctuations around the ex-dividend date with share prices adjusting relatively less compared to the expected dividend yield. This finding emphasizes the impact of dividends on investor behavior and the potential implications for investment strategies. Slovenian investors, on average, seem to be more inclined to retain their positions in dividend-paying stocks, even when the ex-dividend date arrives.

Conclusion and implications for investors

Analyzing the Croatian and Slovenian stock markets reveals interesting insights into the relationship between price development and dividend yield. The data suggests that in both markets, investors exhibit a tendency to retain their positions in dividend-paying stocks, resulting in relatively smaller price adjustments around the ex-dividend date. This behavior may stem from investors valuing the regular income generated by dividends and prioritizing the potential long-term benefits of maintaining their positions. By holding onto their positions and benefiting from dividend income, investors may perceive these stocks as stable income generators, leading to a more resilient market response around the ex-dividend date.

By aligning investment decisions with an understanding of price fluctuations and dividend yield, investors can navigate the Croatian and Slovenian stock markets with greater confidence, potentially benefiting from consistent income streams and long-term growth potential and opportunities.