It falls on the next day, but over time paying out dividends makes certain kinds of company stock more attractive. Let's run an asymptotic example and say a co

It falls on the next day, but over time paying out dividends makes certain kinds of company stock more attractive. Let's run an asymptotic example and say a company has $1000 in cash and $1 per share in profits. Since most of the company is cash you can't buy shares cheaper than $1000. But you might pay say 10x profit and thus the stock price is $1010. If the company had paid out excess cash all along, the stock price would be $10 at 10x profit, and so every $10 you invest would give you a 10% return versus a 0.099% return. So investors absolutely do not want a mature company hoarding cash. This situation is made worse because income investors would have pushed the price perhaps higher than 10x, but instead now punish you by paying less than 10x of profit.