For one, dividends are paid from net profit which is derived from sales revenue, not stock price arbitrage. No profit no dividend. Therefore the incentive is for the business to achieve its sales targets from improving the business and not just meeting market goals.
Yes, stock buybacks are paid for from “excess capital” which comes from sales but that’s also money that’s not invested back into the business or employees.
Buybacks are a disincentive for management to invest in the business since it only benefits shareholders at the expense of everyone else. That’s not long term value. In fact, they encourage disinvestment and taking value out for short term gains.
The only way to realize the gains from a stock buyback is to sell shares. Not every investor is interested in doing that for myriad of reasons.
Businesses are more than just shareholders. Employees, customers, suppliers and communities are also stakeholders.
Edited to add: dividend investing is desired by a large segment of investors that are looking for long term stable returns. Retirement funds for example want reliable income from dividends not just growth.
