Your premise that the stock price is "just pure massive speculation of the market players to begin with." is wrong.
Maybe in the short term, but in the long run the stock price of companies reflects the value of what they are able to build. When management feels that it has cash that it is unable to invest productively in building company value it returns that cash to shareholders in the form of dividends or buybacks.
As Benjamin Graham said, the stock market is a voting machine in the short term but a weighing machine in the long term.
The idea is that if a company doesn't have compelling business plans requiring further investment that will likely generate a significantly better ROI than the cash can generate, then the excess cash should be returned to the owners of the company. (i.e. the shareholders) A secondary benefit is that dividends make stocks more expensive to short (i.e. speculators betting the share price will go down... and often helping it do so) and can often increase the price paid in hostile takeovers (i.e. the acquirer will often have to pay a higher premium to get the shareholders to accept than if the company just kept the money in cash equivalent investments)
What has changed in recent decades is that dividends are generally not considered the most tax-efficient way to get the money to the shareholders so stock buybacks (which presumably increase the share price and will be taxed as capital gains when shareholders sell as opposed to income when received as dividends) are often preferred.
For a company whose sales have reached cruising altitude, a dividend is the equivalent of the interest you'd be paid, had you put the same money into a bank account.
Amazon and Facebook are growth stocks so investors don't mind them holding some cash to make investments, fund acquisitions and what not (which is what everyone here seems to want). However, they'll both probably hit a 100 billion dollars in cash in the next 5 years and I would expect dividends/buybacks to follow soon after as that is more cash than anyone reasonably needs.
If a company never issued dividends and never bought back their own stock, then there would be no reason for investors to buy stocks in the first place. Most investors don't invest out of the goodness of their hearts, they invest to get a return on capital.
[0]: https://qz.com/1611997/warren-buffett-hints-on-timing-of-big...
For what it's worth, companies with a long history (25+ years) of growing dividend payments tend to outperform the broader market over long periods of time.
Let's say I buy WalMart stock tomorrow, why should I be prioritized in the distribution of profits next year? I never gave a dime to WalMart, at best I helped the stock price a little. The folks at the warehouse though, have a measurable contribution to the performance of the company. Or in other words, why WalMart has to pay to the eternity a "loan" that it got at the IPO, and not use the money for improving the company itself with the potential to further increase its value?
It is wrong to think of a stockholder as having given a "loan," because that is not what stock represents. Stock represents an ownership stake in a business, and ownership is perpetual (a perpetual loan makes no sense -- it is not a "loan" if it can never be repaid).
Stock ownership is transferable for a publicly traded company, which is why someone who did not buy their stake directly from the company can be entitled to all the benefits of someone who did. This is a good thing because it reduces the risk of investing -- if you invest in a company, and later on find yourself short on cash, you can sell your shares (though it may be for less than you paid, but that's just how it goes when you own something). If the buyer of your shares were not entitled to the same benefits as you, why would they buy the shares in the first place?
That is also why a company ultimately serves the interest of its shareholders -- they are the owners. That is how a capitalist system works, so if you think this is problematic then you really have a problem with capitalism. What sort of system would you like to see? Communist systems have not been nearly as successful historically (which is why there are so few remaining) and socialism has only worked well as means of supporting capitalism (e.g. providing people with food, healthcare, education, transportation, and whatnot so that they can participate in a capitalist system in a meaningful way).
1. Paying dividends makes you an attractive investment to people looking for long-term investments, such as pension funds.
2. This increases stock price, and when a corporation holds much of the stock, this increases the corporations holdings.
3. Those individuals working within the corporate structure that hold stock, increase their net worth.
4. The corporation and influential employees gain, and so keep paying out high dividends.
Please correct me if I'm wrong, as I'm just guessing.
> 1. Paying dividends makes you an attractive investment to people looking for long-term investments, such as pension funds.
Close, but paying dividends makes you an attractive investment to anyone. Stock in a company is valuable because the company pays dividends, is expected to eventually pay dividends, or is expected to be bought out by another company.
> 2. This increases stock price, and when a corporation holds much of the stock, this increases the corporations holdings.
This mostly should not change the stock price. If the market believes that the company is foolish to pay the dividend because it is able to get a higher rate of return than its shareholders will be able to get with the money, then announcing a dividend would reduce the share price. If the market agrees with the company's management that the company does not have better investment opportunities than the shareholders, then the share price will go up if the dividend was unexpected (i.e. the market thought that the management was stupid, but it turns out they are not), and otherwise will not change.
> 3. Those individuals working within the corporate structure that hold stock, increase their net worth.
As previous, not really. Under normal circumstances paying a dividend will have, if anything, a negative effect on the share price. (The company has less money now, why would it be more valuable?)
> 4. The corporation and influential employees gain, and so keep paying out high dividends.
Sorta correct! Once you begin paying a dividend, cutting the dividend should indicate one of two things. Possibility one, you have found new investment opportunities to better deploy the money than the shareholders could. Great news! Possibility two, the company is struggling financially and no longer accrues profit that it can use to pay the dividend. Bad news! If the market doesn't believe that the company has good investment opportunities, then cutting a dividend should be taken as a sign that the company is struggling, and the stock price would fall (If the company can't afford to pay dividends, why own the stock?). So if influential employees hold a lot of stock, they will be inclined to continue paying the dividend.