If payout policy is irrelevant or has no effect on firm value, then why do individuals have a preference on payout policy? Shefrin and Statman provide a really interesting illustration of why payout policy may be important to individual investors by highlighting a particular case of a dividend omission by Consolidated Edison in the 70s, which occurred after 89 years of uninterrupted dividends. One of the shareholder's statements concerning the missed dividend payment during the 1974 annual meeting was as follows:

What are we to do? You give us shorthand answers. You don't know when the dividend is coming back. Who is going to pay my rent? I had a husband. Now Con Ed has to be my husband.

An excellent and very readable summary questioning the dividend's relevance is provided by Black and a summary of the current state of the literature is found in Baker and Weigand. The questions that you should consider for this discussion response are as follows: (a) Is dividend policy irrelevant, (b) Are there more efficient ways to provide a return on capital to shareholders, and (c) How should managers use this information to make decisions about how to return capital to shareholders?