^ Incorrect. A share of equity is a claim on ALL the company’s net assets. In the example above, if a company earns $1,000, those $1,000 are deposited in an account owned by the company. When this happens, the company’s assets increase in value by exactly $1,000. Reasonable investors will pay a $1,000 higher market cap to buy the company that has an extra $1,000 in its bank account.
Example: ChpBstrd Dump Truck Service owns one truck worth $14,000 and $1,000 cash in the bank. Thus, a reasonable price to pay for my little company (truck plus account) is about $15k. Suppose the company earns another $1,000 tomorrow and the truck does not depreciate by anything. It now has a $14k truck, plus $2k in its account. Reasonable value: $16k. But now, CBDTS announces a $500 dividend to be paid to whomever is its owner on the ex dividend date. At the moment the dividend is committed to me (the ex dividend date), the net assets of the company go from $16k to $15,500. These assets include a $14k truck and $1,500 cash in the bank.
It’s not that the stock price is automatically adjusted, as the investopedia article implies, it’s that investors are willing to pay less for a company with fewer assets than they are for a company with more assets. When CBDTS reduces its assets by $500 by giving its funds to someone else, it becomes worth $500 less than before.
For a real life example, observe how NLY fell by exactly the amount of their 25 cent dividend on their last ex div date. Next quarter, it will do the same.
Of course, the broader market is swinging around at the same time, so the effect is harder to see than it is to infer, but logically it has to exist. Otherwise there would be a simple arbitrage opportunity where one could buy stocks on their ex dividend dates, sell the next day, and collect the dividends for dozens of stocks per year without suffering capital losses. Returns would be astronomical if the stocks never fell.