[quote=evolusd]I believe dividends are paid out of profits/cash flow, not by issuing new stock and diluting existing shareholders (if that’s what you mean by ‘stocks are sold’).[/quote]
Correct, dividends are typically paid out of retained profits, but the effect on share price should be reflected by a corresponding drop in market cap and hence the share price (in a perfect market.) That’s why you’ll typically see share prices drop the day the go ex-dividend.
Say, there’s probably a much better explanation of this online somewhere, but if you cant be arsed to google it, mm, neither can I..
