Hopefully I add something new to this discussion. I'm going to say it from a different direction.
Paying dividends is not "left hand to right hand". In the boundary case, this would apply only to a company that only has cash as an asset and even then cash can be deposited into a bank account and earn interest. A company has assets that generate cash (hopefully).
The reason why share price tends to drop after ex-div is simply due to a no-arbitrage effect. If the share price did not drop ex-div, then I could buy shares just before ex-div, and sell them after ex-div, and collect the dividend at the same time. Exdiv drop is just the market's response to removing an arbitrage opportunity.
The constant thread I see in this discussion is that dividends are concrete while earnings rely on your interpretation of someone else's presentation of the company's financials and prospects.
Another slanted way to see it is like this. I have a stock with price that behaves like this: Price x (B + At) where B is dependent directly on the general market and A is the expected (mean) annual return over time. From experience B is much larger than Ar over short periods of time, so that to a casual observer, it might seem that the stock price just bounces around, but because B is random, it will eventually end up as zero over time and you earn At in the long run. In such a case, receiving dividends is making part of that return deterministic (certain) every year, and it ends up smoothing your earnings noise over time. But of course, you still have to do your homework to make A as sure as possible !
Paying dividends is not "left hand to right hand". In the boundary case, this would apply only to a company that only has cash as an asset and even then cash can be deposited into a bank account and earn interest. A company has assets that generate cash (hopefully).
The reason why share price tends to drop after ex-div is simply due to a no-arbitrage effect. If the share price did not drop ex-div, then I could buy shares just before ex-div, and sell them after ex-div, and collect the dividend at the same time. Exdiv drop is just the market's response to removing an arbitrage opportunity.
The constant thread I see in this discussion is that dividends are concrete while earnings rely on your interpretation of someone else's presentation of the company's financials and prospects.
Another slanted way to see it is like this. I have a stock with price that behaves like this: Price x (B + At) where B is dependent directly on the general market and A is the expected (mean) annual return over time. From experience B is much larger than Ar over short periods of time, so that to a casual observer, it might seem that the stock price just bounces around, but because B is random, it will eventually end up as zero over time and you earn At in the long run. In such a case, receiving dividends is making part of that return deterministic (certain) every year, and it ends up smoothing your earnings noise over time. But of course, you still have to do your homework to make A as sure as possible !