Cash dividends are a favored investment approach for many investors as they provide tangible returns. However, many investors don't truly understand the implications of cash dividends or how they affect stock prices and investment returns. This article provides an in-depth analysis of the concept and substance of cash dividends.

First, cash dividends represent payments made by a company to its shareholders, typically drawn from a portion of the company's distributable profits. These funds are deducted from the company's after-tax net profits before being distributed to shareholders. Therefore, the actual source of cash dividends is the company's net profits.

For shareholders, while cash dividends generate income, this return may be diminished by factors like taxation. For instance, holding 1,000 shares with a dividend of 1 yuan per share yields 1,000 yuan in dividends. But with a 20% personal income tax, the actual net gain is only 800 yuan.

Moreover, cash dividends impact stock prices. Before the ex-dividend date, share prices may rise due to market expectations of future earnings. However, upon dividend declaration, the stock price typically declines correspondingly, as the company has already distributed part of its earnings to shareholders, thereby reducing future returns. If a company's dividend policy is unstable or opaque, it may also raise investor concerns about its prospects, further affecting its stock performance.

Overall, while cash dividends provide a stable income stream, investors should understand their underlying mechanism. Careful consideration of factors like taxation is essential, along with preparation for long-term investment. Investors should also assess a company's operational status and growth potential to better evaluate its investment value.

Notably, unless investing in fundamentally strong blue-chip stocks that may quickly recover post-dividend (known as "filling the right"), or strategically positioning in dividend stocks for arbitrage, short-term chasing of high dividends for quick gains will likely result in losses. Investors should remain cautious.