The math doesn't tell the whole story.
Mathjak is absolutely correct on the mechanism and math behind dividend distributions.
However, that makes zero difference to why I like dividends.
Companies with a solid record of dividend growth tend to be very good long term investments.
During recessions, I have no concerns about selling stocks at a loss, and the dividends tend to hold up far, far better than the stock prices. This is just one case, but for me, in the last recession, my portfolio lost about 40% of its value, my income stream from dividends was down 3% for one year and then recovered.
The psychological benifit of having less volatility is very valuable to some.
The fact that my dividend income stream grows by 7-8% a year is also very helpful.
So in good years, I contirbute more to charities, reinvest some, or a bit of both. In the worst of years, I hold pat. No need to sell anything with the exception of now as we plan to build a new house.
The math is important for everyone to understand, but the math is not the whole story.
actually yes , the math is the whole story when it comes to your total return.
once again though whether you sell stocks at a loss to generate that dividend or the company sells off a piece of your share price and hands it to you with the same loss there is no difference.
a growing dividend just means bigger reset in value when it is paid out . all in all this is also an area where there is zero difference.
a stock paying a dividend out in a downturn not only has a market action loss but it also has the loss from the reset in price from the dividend adding to the down trend.
a stock in a downturn has the starting bar lowered each quarter out of the gate producing a lower and lower share price based on what was paid out each time.
where ever the markets leave it for the quarter it takes an extra hit by the payout amount .
sorry once again that makes little mathamatical sense.
a stock starts out the quarter at a certain value , from the open, market action takes it up or down a percentage. at the end of the quarter that dividend is payed and the price lowered by the same amount.
the bar is lowered and the next quarter kicks off and does its thing.
whether that action is up or down for the quarter given the same total return selling off a piece of on your own of a non dividend payer leaves you exactly even steven.
the not selling shares at a loss vs the dividend payout being better is false logic.
by selling on your own and not having a share price adjustment you need to sell less and less of a share to equal that dividend over time .
there is no way around the fact same total returns always equal the same results whether all capital appreciation or a mix of dividends and appreciation and it does not matter if markets are up or down.