Does the price come back after the distribution?
On the ex-date the price falls by roughly the amount paid out: that money has left the fund. The question nobody measures is whether the price climbs back — because a fall that is never recovered is not a distribution at all. It is your capital, returned to you and taxed on the way. We measured it on 123 European funds and 3,900 ex-dates, and the worst offenders are not the ones everybody warns you about.
What was measured
For every distribution of every fund in our universe: the closing price the day before the ex-date, the close on the ex-date itself, and then every close for the following three weeks of trading. Two numbers come out of it. The drop ratio — how much of the distribution the market actually took off the price. And the recovery rate — in what share of ex-dates the price got back above its pre-distribution level within fifteen trading days.
123 funds had enough ex-dates to measure; 25 are too young.
1. The market prices the distribution almost exactly
Theory says the price should fall by the amount paid. It does, and more precisely than we expected:
| Category | Funds | Drop as a share of the distribution |
|---|---|---|
| Fixed income | 15 | 0.96× |
| Classic dividend ETFs | 36 | 0.96× |
| Covered-call funds | 57 | 0.85× |
| Index funds | 15 | 0.82× |
So the common idea that one can "capture the dividend" by buying before the ex-date and selling after it has no arithmetic behind it. You receive the distribution and give up almost exactly the same amount in price — and in Italy the distribution is taxed at 26% while the price drop only shelters you if you have realised gains to offset. Dividend capture, for a European retail investor, is a way of paying tax on your own money.
2. The recovery is where funds separate
Every fund falls on the ex-date. What differs is what happens next.
| Category | Recovers | Median days to recover |
|---|---|---|
| Index funds | 83% | 1 |
| Classic dividend ETFs | 73% | 2 |
| Covered-call funds | 66% | 3 |
| Fixed income | 48% | 5 |
This was the finding we did not expect. Covered-call products are the ones with the reputation for eroding, and they do erode — but they have an equity engine underneath that pulls the price back two times out of three. A high-yield bond fund has no such engine: the coupon it collects is the coupon it pays, so every distribution leaves a mark that the next month does not erase.
3. The funds that never come back
| Fund | What it is | Distribution | Recovers | Ex-dates |
|---|---|---|---|---|
| SDHY | iShares short-duration high yield | 2.42% | 0% | 27 |
| EUNW | iShares € high yield corporate | 2.12% | 7% | 27 |
| HYLD | iShares global high yield | 2.31% | 10% | 29 |
| QQQY | Nasdaq 100 option income ETP | 5.99% | 12% | 24 |
| SPYY | S&P 500 option income ETP | 4.31% | 17% | 24 |
SDHY has paid 27 distributions and the price has never once returned to where it stood the day before. That is not a scandal and it is not a badly run fund: it is what a short-duration high-yield bond portfolio does when it distributes everything it earns. But anyone holding it for income should know that the yield they see is the whole of the return, not a part of it.
And the ones that recover almost always
At the other end sit the quality-dividend and index funds: DGRW recovers in 95% of its 39 ex-dates and typically the same day, VUSD and VWRD in 89%, HMWD in 91%. Their distributions are small — between 0.3% and 0.7% — and the portfolio grows enough to absorb them before the week is out.
4. Recovery predicts erosion
The point of the measure is that it tells you something in advance. Across the 97 funds where we have both numbers, recovery rate and twelve-month price return move together:
The correlation is 0.35 — real but not deterministic, which is what you would expect: a fund can recover its distributions and still fall because its market fell. What the measure isolates is the part of the decline that the fund causes itself, by paying out more than it makes.
That is why it now sits on every fund page as Distribution recovery, next to the yield. A 12% yield recovering 90% of the time and a 12% yield recovering 10% of the time are not the same product, and no other figure on the page tells them apart.
What to do with it
Read it with the yield, never alone. A low recovery rate on a fund paying 0.4% is noise; on a fund paying 5% a month it is the whole story.
It does not make a fund wrong. Returning capital is a legitimate thing for a fund to do, and for someone drawing an income it can even be what they want. It is only wrong when it is mistaken for yield.
Use it alongside coverage. Our Sustainable Income screener measures the same thing from the other end — how much of what the fund earns is going out — and the two agree often enough that a disagreement is worth investigating.
Method and limits
- Fifteen trading daysThe recovery window is three weeks of trading. A longer window would flatter everything, a shorter one would punish funds that pay around a weak week.
- Closing prices onlyWe compare closes, not intraday levels, and we do not adjust for what the wider market did that day. On a small distribution the market noise is larger than the distribution itself, which is why the measure means little below 1%.
- Different historiesSome funds have 55 ex-dates, others 6. The table above shows the count for each, and anything under ten should be read as provisional.
- Not a ranking of qualityThis measures one thing only. A fund can recover every distribution and still be expensive, concentrated or badly timed.