dividends

Dividends have two values: financial and psychological (although this is also financial, as I'll explain).

The financial advantage is that a dividend paying stock gives the stockholder a steady stream of income, much like interest in a checking account. If the stock is selling at $20.00/ share with a $0.25 quarterly dividend, then you are making an automatic 5% return (4 x .25/20), even if the share price doesn't change.

If I understand you correctly, then you are saying that if there was no dividend, then the stock would be likely selling at $21/share. This may or may not be true, but this brings me to my second point.

By the mere fact that the stock has a dividend, it is management's way of showing that they have confidence in the revenue stream, since they would need that to pay the dividend (assuming the dividend has been the same or rising for a while). You will notice that large, stable blue-chip companies are the ones most likely to pay dividends. It also encourages investors to hold the stock (to get the dividend) rather than buy and sell it.

Combining both these properties, the dividend also helps support the stock in bad times. As the stock drops, the dividend rate increases. If the stock was $10, it would now pay 10%. Without the dividend, the stock has a better chance of dropping further.