Dividend stocks are not immune to price drop due to opinions of an entire industry souring. Selling shares has two advantages over dividends: 1) Lower tax rate and 2) Much of the proceeds is principal. The disadvantage of selling shares is that it depletes the portfolio and eventualy, you run out of shares to sell.

If you need cash and happen to have shares of a stock that you no longer feel confident in, you can certainly kill two birds with one stone by selling it. But you usually don't want to be in the situation of having to sell stock that you think will appreciate, because you need the cash.

If you need cash and you happen to have shares of a stock that you no longer feel confident in, you sell them. It doesn't matter if it's a dividend or non-dividend stock. Sell. Regardless, this strays from the premise of the OP's question about what the benefit is of a dividend stock if share price is reduced by the amount of the dividend.

Of course. I'm not sure what in my answer suggested there's a difference. In practice, companies in trouble tend to cut dividends as one of their first cost-cutting measures, so dividend-paying stocks tend to be higher quality.

This is the most practical answer for most investors. You will never convince that guy because he believes that dividends are extracted from the share price somehow. I've never gotten a straight answer about where he thinks the cash comes from, but it seems like he thinks the exchange generates it by subtracting it from the share price or something.

@JimmyJames There's something to that. Share prices are somewhat artificial, since they're based on what investors estimate the company is worth, which includes prognostication about future prospects. The real assets of the company has a limited effect on this.

@Barmar There's something to what? That cash investors receive from dividends comes from the share price? Um. no.

@JimmyJames The share price is reduced automatically when the dividend is paid, but this doesn't reflect any change in investor opinion of the company like other share price changes.

@Barmar Yes, I'm pretty sure we are in alignment about how it actually works. But from what I can gather (again, because he refuses to answer directly) he thinks that literally, the cash you get in your brokerage account came from the difference between the closing price and the adjusted close price. I have no idea how that supposed to work, though.

Are you referring to the OP? I thought you were talking about naive investors in general. I haven't been following the comments there.

I'm talking about the other person that commented on your answer.

Jimmy boy, you continue to conflate where a dividend comes from and what happens to share price on the ex-dividend date. When you stop obsessing about the former, you might understand the latter.

@BobBaerker I know exactly where the dividend comes from. I can show you the statements for MS if you like. What's not clear is where you think they come from.

@BobBaerker You haven't ever explained why the price drops on the ex-dividend date. You just say something about the exchange and the FINRA rule. That's 'how', not a 'why'.

You've made multiple misstatements about dividends-it would be a Herculean task to clean up your Augean stables. To wit, you claim share price wasn't reduced by the dividend in the 1970s. Sorry, but that's gone on for more than a century. Want verification? Google is your friend. I'll pass on cleaning up all of your other misconceptions and simply state again that "Before trading opens on the ex-dividend date, the exchange marks down the share price by the amount of the declared dividend." Oh sorry, these are the exact words at Dividend.com which you can also find at Fidelity, Vanguard et al.

And please spare us more of your Golden Goose and artic magenta Stanley travel mugs analogies. They're naive and absurdly misguided.

@BobBaerker I don't need to google things I already understand and have a graduate degree in. Since you refuse to explain what you actually think happens, I have to assume you really have no idea. Here's what I have gathered from your claims: the value of the stock you hold decreases by the exact amount of the dividend but that has nothing to do with stock valuation. In addition, you think it makes no difference where the cash payments come from: simply the fact that holders received cash causes the value of the company to be reduced.

Please take this discussion to private chat

I have met many people who believe that because they have a graduate degree, everything thing that they say is the gospel. Welcome to the club.