There is a certain comfort in pretending that the decision of a corporation as to declare dividends, buyback stock or just reinvest all available cash in the business, has no effect on the present valuation as these are all future events undertaken with assets of the business that exist today.
If you were on the board of directors of any major company, and in interviewing for a CEO had 3 to choose from:
1) Candidate one states the importance of financial governance and sharing the results with shareholders via dividend a predictable income stream - between 30 to 40 percent of the profits, with the dividend expanding faster than the general rate of inflation and the investment of the other 60-70 percent of the earnings in projects that allow the company to grow into the future.
2) Candidate 2 states reinvesting all profits in a tax free manner to the owners of the company in such a way as they decide when to take their profits by selling at an opportune time. As such the annual cash flow of a project undertaken does not hold as much importance rather he is looking long term down the road.
3) Candidate 3 believes the assets of the company should be leveraged immediately to buy back as much stock as possible through all available cash flow including utilizing debt to maximize share count reduction. Through reducing share count the company will be able to concentrate the value of the company in fewer hands and increase shareholder value. As long as the return of the company financials exceeds the cost of debt, as much debt as can be financed without risking credit issues will be the result of hiring this executive.
I for one try to invest with CEO's that fit into category #1, but to think that any of these styles have no long term or short term impact on the valuation of a company or the financial outlook of the corporation; is a result of a market at an all time high when almost any idea is rewarded as a good idea and aggression is exceptionally well rewarded. And there are many times as now when aggression is very well rewarded. But as Jeremy Siegel pointed out in his study of stocks over an 85 year period, dividend paying stocks outperformed non dividend paying stocks by more than one percent per year over an 85 year period, but that does not mean dividend stocks fit your personality and investment style.