How to model ex-dividend stock for DCF???
Trending Content - Equity Research Forum
Career Resources
WSO Free Modeling Series - Now Open Through
June 30, 2026
9 Free Financial Modeling Lessons
Get instant access to lessons taught by experienced private equity pros and bulge bracket investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling.
+Bonus: Get 27 financial modeling templates in swipe file
+Bonus: Get 27 financial modeling templates in swipe file
High Finance Applications
Guaranteed
Get at least one offer GUARANTEED
- 1:1 support
- 92% success rate
- 2,000+ mentor network
- Unlimited Live bootcamps
- AI for resume + LinkedIn
- Networking automation tools
- HireVue simulation tool
- Full course library
- Private Slack community
- 20hrs of mocks
- + much more...
To be precise, the stock should fall the day after the ex date, not the date the dividend is paid.
^ I understand that. But in terms of modeling, shoud I take away $.50/share * 20 million shares = $10 million on the balance sheet since they paid out the special dividend?????
Can you think of a good reason not to deduct cash you know the company does not have???
So if the company had $30 million cash on the balance sheet in July 2015, and they paid the special dividend this month ($.50/share * 40 million shares), would they now have $30 million - ($.50/share * 40 million shares) = $10 million cash left and I should use $10 million now on my DCF?
Sure, why not. Not sure if .50 makes a difference in valuation but go ahead.
Dividends wouldn't play into Unlevered FCF (NOPAT+D&A-capex-change in NWC), however if you are doing a project finance style cash flow waterfall (CFADS->> CF available for equity etc) you would want to show the dividend being paid out of CF available to equity to get to Residual cash flows (IE your cash flow available for debt service would be before the dividend, so looking at it as a pref or construction financing investor, I don't care if you pay dividends because the equity holders are below me in priority so I would be looking at CFADs). In terms of where this would hit your BS if you are doing a 3 statement, it would be in the cash line of current assets (as a subtraction to show the cash leaving) and in retained earnings portion of Stockholders Equity (RE ending = RE begin + net income -dividends paid during period) and it would also hit the cash flow statement as a cash outflow in CF from financing (since dividends aren't captured in NI, need to be subtracted here).
Hope this isn't too confusing, the short answer is it depends from whose perspective you are looking at CFs and for what purpose.
Why do you have to complicate such a simple question?
Reiciendis amet autem ut adipisci. Sed quod quaerat ut ea odit tempora non. Reprehenderit et debitis optio quia error. Ut cupiditate animi dolorum nisi. Veniam mollitia amet incidunt. Architecto voluptas amet ut quo animi vitae molestias.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...