<i>"Put another way: Company X's stock is $100/share. They issue a 50 cent dividend. The stock price will go down to $99.50/share upon announcement. "</i><p>That statement is patently incorrect, in theory and in practice.<p>PRACTICE<p>The share price of companies that announce dividends every quarter has little immediate correlation to the dividend announced.  In the long term, companies that consistently <i>raise</i> dividends year over year actually <i>increase</i> in value.  (These are affectionately referenced as "dividend darlings" and are a focus of some investment strategies.)<p>THEORY<p>The purpose of a company is to <i>make money.</i>  You do this by spending capital to create a product.  Once you sell that product, you regain back the capital you invested in earnings.  The goal is to eventually make back more money in earnings than what you invested in capital.<p>If I buy a bar in my neighborhood for, say, $100k, I would expect to make money back on it.  If I worked hard to build a clientele and earned something like $30k a year from my customers (a spectacular return, by the way), then the bar would be earning money.  I could then afford to pay some of that out to the shareholders - in this case, just me.<p>What your notion of dividends seems to be is a cannibalization of the equity present in the company.  If the company has no product of intrinsic value, then yes, your example might hold true.  In the bar example, you would believe that the bar is worth <i>only</i> $100k (the price I paid) and that any money I pay out would be coming out of that $100k.  This would be true only if I did not work to get customers and therefore did not make any money over the year.<p>SUMMARY<p>For companies that provide value in the form of goods and services, the money you get out of it will be more than the money you put in.  This frequently, and oftentimes should, take the form of dividend payments.<p>ALTERNATIVE<p>Having said all that, there are very legitimate reasons why tech companies do not pay out dividends, namely that they reinvest the profits in research and development to produce new and better products.  I don't think anyone who bought Apple stock seven years ago is complaining about the lack.