Part 3/10:
Critically, this illustrates how dividends impact stock prices. While it's accurate that dividends reduce the stock price post-distribution, they directly represent the shareholders' share of profits, allowing them the flexibility to choose how to allocate that income.
The Flexibility of Dividends
Investors need dividends because they offer flexibility in cash flow management. Shareholders can use the income as they see fit—whether to reinvest, supplement income, or other financial needs. For those who prioritize control, dividends can be more appealing than capital gains from appreciated stock prices, where profits are only realized through selling shares.