What are dividends? Are dividends irrelevant? What assumptions substantiate that dividend policy is irrelevant?

A dividend is the distribution of some of a company's earnings to a class of its shareholders, as determined by the company's board of directors. Common shareholders of dividend-paying companies are typically eligible as long as they own the stock before the ex-dividend date.

Conceptually, dividends are irrelevant to the value of a company because paying dividends does not increase a company’s ability to create profit.

When a company creates profit, it obtains more money to reinvest in itself. It can signal to investors that the company now possesses more capital/capability to create more profit and lead to an increase in the company stock price.

Some of the assumptions

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