Dividends are the way forward

If you take the view of Miller and Modigliani then you would see dividends to be a residual amount after investing in NPV projects which would leave them to be irrelevant when trying to increase company value.  What they argue if you give a dividend it must mean that you have no investment opportunities and so this should be more worrying to investors than not recieving a constant flow of returns. 

With this in mind I beleive this shows investors to be short sighted which forces managers to jeaporadise the long term value of the company to be able to meet the short term needs of the shareholders. An example of this is the fact American company's release quarterly figures and returns to shareholders just to signal to them that they are doing ok, whether this is true or not?!

The questions is therefore, if managers can find a better way to show to investors that they are putting their money to good use? Because if they just simply reduce or cut dividends investors see this as a sign the company is doing bad and be convinced they need to reduce their risk and move their stocks to another compny, or the other option is to demand higher returns to feel more secure.  If this is the case to an extent it allows sharehodlers to hold leverage other managers doesn't it?

Since the recession, one way company's have helped their surivival is through costs cutting of unnecssary expenses and as dividends are not a legal obligation, this fell under this category. Even big organsiations like Anglo Amercian were going this, but because others were doing this also shareholders don't hold the leverage because moving their stake to another would not solve anything.  Despite this reasoning share prices of company's still fell supprting the Bird in Hand Arguement that dividends help show to investors the certainty of future cashflows and returns of the company, but since Anglo American restored dividends in 2010 share prices began to rise again showing investors are gaining more confidence and security in their management.