They have a positive effect on valuation during a financial crisis and a negative one when markets are booming.
See more on CFO.com: http://www.cfo.com/article.cfm/14566545/c_14566341
Given the research we did, this is my advice to companies:
1. If your company doesn't earn the required return and you expect growth to be lower than 8.1% per year, then you should absolutely pay a dividend.
2. Even if your company does earn a high return, if you are not rapidly growing, your TSR would probably benefit from paying a dividend.
3. If you expect to grow rapidly, dividends may constrain your TSR, particularly if they consume cash you could have devoted to funding profitable growth. This is even true if your returns are currently below the required return.