According to M&M they feel that dividends, under the very restrictive assumptions of their theory are irrelevent, which is because you can buy fractional units of shares, there are no tax implications of selling and no brokerage fees (unrealistic). From an abstract standpoint this makes sense, and helps one understand some CF concepts better, but realisitically it doesn't help an analyst too much.
Speaking outside the curriculium for a minute I feel that the bird in hand theory is in itself similar to the dicussion in the bond section on reinvestment risk. Namely there is an element of reinvestment risk involved, especially if the is experiencing a growth or return on equity that is higher than the average firm, which would in and of itself faciliate the need for the creation of residual dividend policy.