Previous literature reports mixed empirical evidence on the existence of dividend clienteles. In this paper, we hypothesize that corporate managers are aware of dividend clienteles, irrespective of whether they exist, when making corporate decisions. Consistent with the hypothesis, we find that if the dividend policies of the acquirer and the target in M&As are materially different (similar), the method of payment is more likely to be cash (stock). We also find that the market responds to the payment method and dividend clientele. In stock-based deals, a difference in dividend policies is negatively correlated with announcement returns.