- The “tit in hand” theory says that investors prefer stock dividends over potential capital gains due to the uncertainty of capital gains.
- The theory was developed as a counterpoint to Modigliani-Miller’s dividend irrelevance theory, which claims that investors don’t care where their returns come from.
- Capital gains investment represents the “two in the bush” side of the proverb “a tit in the hand is worth two in the bush”.