Dividend - Relevant or Irrelevant?

Modigliani & Millar (1961) argued that share price could not be determined by dividend payment, it is actually determined by the future earning potential of the firm. However, authors like Linter (1956) and Gordon (1959) believe in the relevance of dividend. Both concept have an understandable rationales. It has to be noted though, M&M don't absolutely reject the payment of dividends but expresses it irrelevance to shareholder wealth. From an investor's point of view, the payment of dividends can mean a lot, some investors require the regular income from dividends for cash flow purposes therefore a lack of dividend payment automatically cuts out a huge amount of potential investors. Linter and Gordon tend to follow the "Bird in Hand Argument" basically meaning investors prefer dividends because of the security it offers as it provides some level of certainty to investors. Generally, the argument proposed by M&M that in place of dividends investors can sell their shares however, the duo neglected the fact that investors will lose part ownership of the firm by selling shares. This reason alone is enough to boost the relevance of dividend payments.

Also, the use of dividend payments to predict the performance of a company is common among investors therefore, not paying dividends could come across as bad news being emitted from the company. However, Pettit (1972) and Ahonery & Swary (1980) confirm that in reailty the reverse might be true. They believe in reality high dividends may indicate a lack of attractive investment thereby lower future investment returns and low dividends may indicate lots of attractive investment and ascertain future investment returns. This situations are valid however in times of economic downturns such as recorded in the US by Justin Baer in his article "US investors start year with paucity of pay-outs". Majority of companies in the US have cut dividend payments and some have even gone up to cancel it, their main reason being the economic downturn witnessed  in 2007. Analyst predict a tough time ahead for investors due to the effect of the economic downturn as companies all over the world are reviewing their dividend policy. The question in a situation of this nature is, can dividends be used to determine shareholder value? is it that relevant? Companies like Dow Chemical who has paid dividend for over 389 quarters have cut dividend payments, is this a diminish of shareholder wealth? if it is does it then mean dividends are relevant otherwise vice versa?