What is puzzling, however, is that it should not matter to investors whether a firm pays dividends or not: [2] as an owner of the firm, the investor should be indifferent as to receiving dividends or having these re-invested in the business; see Modigliani–Miller theorem.
A further and related observation is that these dividends attract a higher tax rate as compared, e.g., to capital gains from the firm repurchasing shares as an alternative payout policy.
[3] [2] The long term holders of these stocks are typically institutional investors.
From the signalling perspective, [4] cash dividends are "a useful device" to convey insider information about corporate performance to outsiders, and thereby reduce information asymmetry; see Dividend signaling hypothesis.
Thus here, respectively, investors will prefer (and pay for) cash dividends, as opposed to reinvestment in the firm with possible consequent price appreciation.