Okay. Everyone and their brother says that dividends don't matter, but I remain unconvinced.
Everyone says the value of a stock falls by precisely the same amount of the dividend. So if Company A has a stock worth $10, then a $1 dividend payout leaves the stock at $9, because that cash was removed from the company.
But stock prices aren't determined by the actual assets the company holds. They're largely determined by our collective thoughts on the future. That's why there are many, many stocks that do not make any money at all, but have positive prices. The amount of cash on hand matters to an extent, but not to the extent that this hypothetical scenario suggests.
Let's take Company B which has assets of $9 and liabilities of $1. The price is currently $9. They announce that their earnings guidance is 100% higher than last year. Do we really think the price is going to stay at $9 because that's all the capital they have?
TLDR: since price is a mixture of opinion on earnings & balance sheet, then dividends reduce value only by the proportion of price determined by balance sheet.
Idk I might be wrong tho.
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