YAhmed

Dividends also suggest that there are no major growth opportunities justified at the company's WACC. So if it is believable that the company can't really grow profits at WACC or above, then it makes sense to pay dividends (or share repurchases, which are more efficient for taxable investors).

The key idea here is that if a company is retaining earnings, but doesn't have sufficient ROE, then that's a sign that capital is being destroyed.