are dividends irrelevant 
economists merton miller and franco modigliani argued that a company s dividend policy is irrelevant and has no effect on its stock price or its cost of capital a shareholder may be indifferent to a company s dividend policy especially if the dividend is used to buy more shares if a dividend payout is seen as inadequate an investor can sell shares to generate cash in either case the combination of the value of an investment in the company and the cash they hold will remain the same miller and modigliani thus conclude that dividends are irrelevant and investors shouldn t care about the firm s dividend policy because they can create their own synthetically 12this argument has not persuaded the many investors who consider dividends to be an attractive investment incentive 