They don't get to just decide what they want it to be. There would be some reason why they EARNED less and that would be the cause for the reduction in dividend. The reason why their earnings changed would affect investor's idea of the safety of the investment and the likelihood that the dividend would continue, go back up or drop further. THAT in turn would cause the price to..... do whatever. Get it?
Considering that there is probably a goodly percentage of "retail investors" here ( like me ) that know little or less about the mechanics of how they generate their earnings but worry about how high they are compared to other securities at least initially there would be a degree of "panic the sky is falling the gravy train done run off the track etc etc" causing the price to drop MUCH MORE than would be justified so....if you just like to gamble.... if that happenned you might want to buy the massive dip figuring ir would be an over reaction. OK? Of course the sky DOES fall sometimes. See the last 10 years for references.
It is an easy 15 page read.
Do Investors Expect Higher Returns from Safer Stocks than from Riskier Stocks?
Santa Clara University - Leavey School of Business; National Bureau of Economic Research (NBER)
What would be the impetus for this dividend reduction?
Comparatively speaking, when NLY reduced its dividend, AGNC didn't and has kept the same level. After a couple of weaker quarters, NLY increased its dividend and AGNC stayed the same.
With same investor expectations or a new paradigm? Do investors expect 18% in future? 16%? There are lots of very good IRR calculators out there that will let you build multiple scenarios. If this is 5% or less of your portfolio and you are using options as a hedge, no worries to begin with.