implication of the bird-in-the-hand theory of dividends is that a given reduction in dividend yield must be offset by a more than proportionate increase in growth in order to keep a firm's required return constant, other things held constant.

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The bird-in-the-hand theory of dividends suggests that investors value dividends more than potential future capital gains. Therefore, a reduction in dividend yield (i.e. less dividends paid out) must be offset by a more than proportionate increase in growth (i.e. higher potential for future capital gains) in order to maintain a constant required return for investors.

Implication of the Bird-In-The-Hand Theory of Dividends Is That a Given