Because that’s how the stock market works, the price of a stock is the current value of assets (including cash) + expected earnings (with some correction factors for risk and time). If the company pays out $x of cash it’s $x worth less. You might not always see it it the stock price because expected future dividend payments are also already priced in.
(Most) stocks represent partial ownership (read: control) of a company and most of their value is derived from that.
For an extreme example: if the stock price were to drop below the amount of money that could be made by just selling off all of the assets, then someone would (in principle) just buy all the shares, sell the assets and make a profit.
Each share represents a small bit of control over the company and their assets.
A dividend is just a forced sale of your stock
What?
Imagine you have 10 stocks worth $10 each.
Scenario 1: There is $1 dividend per stock. You now have 10 stocks worth $9 each for a total of $90 in stocks and $10 in cash.
Scenario 2: There is no dividend but you decide to sell 1 stock, you now have 9 stocks of $10 for a total of 90$ in stocks and $10 in cash.
These scenario’s are equivalent unless the stock wasn’t priced correctly.
This is the stupidest thing I’ve read in a very long time.
Why do you think it works like that?
Because that’s how the stock market works, the price of a stock is the current value of assets (including cash) + expected earnings (with some correction factors for risk and time). If the company pays out $x of cash it’s $x worth less. You might not always see it it the stock price because expected future dividend payments are also already priced in.
How do you think it works?
Why would anyone buy a stock that will never pay a dividend? The company is worth money because they pay a dividend, not despite it.
(Most) stocks represent partial ownership (read: control) of a company and most of their value is derived from that.
For an extreme example: if the stock price were to drop below the amount of money that could be made by just selling off all of the assets, then someone would (in principle) just buy all the shares, sell the assets and make a profit.
Each share represents a small bit of control over the company and their assets.