2. If the market places the same value on $1 of dividends as on $1 of capital gains, then firms with different payout ratios will appeal to different clienteles of investors. One clientele is as good as another; therefore, a firm cannot increase its value by changing its dividend policy. Yet empirical investigations reveal a strong correlation between dividend payout ratios and other firm characteristics. For example, small, rapidly growing firms that have recently gone public almost always has payout ratios that are zero; all earnings are reinvested in the