Dividends are just a way to return value to the shareholder.
A dividend is the investor's only tangible share of a corporation's profit. The belief in solely investing for capital appreciation is misguided wishful thinking.
Suppose I offered shares in my company. The purpose of the company is to take $10 from each investor and then repay them a $1 dividend from funds received (10% yield! Woo hoo!!). We also have a sustainable business plan for at least the next 10 years. Would this shell game be a return of value to the shareholder? This sounds like a joke, but it actually resembles the operations of some of these companies.
IMO, the reason investors hand companies their money in exchange for stock is to use the funds to engage in productive activities that will increase the value of their investment. If you wanted to put your cash into a company that will pay it back to you, that's a checking account.
CFOs of well run companies in a mature stage buy back shares to further concentrate ownership among existing shareholders. It is a much more tax efficient way to distribute profits to shareholders. It also allows them to efficiently use offshore cash to the benefit of shareholders without paying local national corporate taxes on repatriated funds (i.e. returned to US as profits).
Those who say otherwise don't understand how to optimize financing and taxes. Shares and debt are how companies finance their business enterprises and CFOs are duty bound to optimize the acquisition and distribution of enterprise cash flows. Historic pressure to pay dividends weighs on them, but they understand it is an irrational shareholder request.
+1. I'll add that many of these "dividend aristocrats" are borrowing from bondholders at 7-10% rates so that they can pay their 2-4% dividends to stockholders. That is, they could have used the dividend money to pay down debt, which would directly increase the percentage of the company's assets owned by equity holders AND reduce interest expense AND reduce the riskiness of the company, allowing them more flexibility to refinance the rest of their debt at lower rates, survive a recession, or make profitable investments. Either paying down debt or buying back shares is an efficient way to boost share prices.
More importantly, paying a dividend is a company's admission that they are out of ideas. They've run the numbers, and can't get a good ROI from expansion, marketing, R&D, acquisitions, new products, efficiency improvements or automation, vertical integration, safety improvements, margin changes, etc. That is, the people running your company are at a loss for how to improve things. This is either a sign that management needs to be fired, or a sign that there truly are no good options for the company. Either way, I'd GTFO of the stock.
I'll admit it. I'm hostile to dividends*. Buybacks, organic reinvestment, debt reduction, and R&D are all signs that the managers I'm hiring will deliver the value creation I'm investing in.
*Exceptions: REITs, MLPs, and BDCs due to special tax rules that make dividends preferable.