Chart adjustment warranted after stock dividend?

["Michael S." <MikeSuesserott@xxxxxxxxxxx>]

This has probably come up before, but here is a recent case:

In mid-August of 2004, Blockbuster Inc (BBI), then trading around $13, paid out a cash dividend of $5 (almost half the value of a share!) to shareholders. Of course, the stock price dropped by an equal amount to about $8.

Peter Worden of TC2000 subsequently adjusted his BBI charts. He writes, "For shareholders of record this entire transaction was obviously a wash. However, for anyone looking at an unadjusted price chart the result was a big downside gap - a drop in price which negatively impacted the technical indicators - a drop in price which obviously did not accurately reflect a true change in the value of the stock. For this reason, we have now adjusted the historical data for BBI, just as we would have done in the case of a stock split."

The problem does not end here, though. For those who had been holding the stock at the time, the transaction was indeed a zero-sum game. New buyers coming in after the dividend payout, however, did receive shares whose intrinsic as well as extrinsic value was definitely $5 less than the day before.

So TC2000 adjusted their charts so as to keep indicators undisturbed. So did Quotes-Plus. Other vendors such as Quote.com kept the gap the way it had manifested that day. It seems to me that both points of view have some value. What do listers think?