Sarenco I haven't fully plumbed the theological differences between yourself and Colm, but I guess it is simply that you are at cross purposes. However the above quote is not quite accurate. On a look through basis, the day before the dividend payment the investor owns, say, 100 of productive assets and 5 of cash. (I am presuming the company generates the dividend from its cashflow and not from disposing of productive capacity.) The payment of a dividend crystalises the position to being the investor owning 100 of productive assets (on a look through to the company) and separately 5 in cash. If she uses the 5 to buy more of the same shares she finishes up, again on a look through basis, with 105 of productive assets. This is not then a reversion to the previous position.The dividend payment causes a company's share price to drop by precisely the same amount as the dividend. So, for example, if a company makes a dividend payment equal to 5% of the stock price, shareholders will see a resulting fall of 5% in the price of their shares. If the shareholder immediately reinvests the dividend payment back into company stock, the shareholder reverts to the position he was in immediately prior to the dividend payment (market movements and attritional costs aside).