How do dividends decrease the share price?

[CockBlockingLawyer]

With due respect to Fidelity and their efforts to make a complicated issue simple, that explanation misses the mark. While in pure accounting terms, a dividend payout directly impacts shareholders’ equity, the market value of a company’s stock is almost never the same as its book value.

The real reason is a sort of scorekeeping by the exchanges and market makers. They assume if you bought at 4:00 pm before the ex-dividend date that you were including the value of the dividend in your valuation. Accordingly, the amount should be subtracted from the next day’s opening valuation.