>Sorta. I think it makes more sense to see them as a return of capital;
>that is, if you buy a $20 stock, and it pays a $2 dividend, your cost
>basis would now be $18.
You're buying a capital asset with the assumption that it will return income for a long time, maybe foreever. You can sell it if you like and get your capital back (and often at a higher price) - it's not like the dividend reduces the asset's intrinsic value.
And where do the profits come from to pay dividends? From uncompensated labor, of course. Why not get a bit back from the rentiers?
>Anyway, the money that is used to pay a dividend has already been taxed
>(I presume this part of the treatment of dividends isn't changing: they
>should not be expensed), lowering the net profit of the corporation and
>thus the 'value' of the stock itself.
Everything is taxed many times. My income is taxed; I buy stuff with my posttax income; the shopkeeper and manufacturer are taxed; etc. The gov't just takes a cut of every transfer in the endless round of circulation...
Doug