[jagjit]

The tech companies, by not paying out dividends, are in effect telling shareholders that they can invest the profits better than them.

This belief I guess comes out in part due to the meteoric profit growth that successful tech companies witness which leads to hubris in the management. The other reason for this belief is the shareholders themselves who let management invest profits in any project they want in the hope of ever increasing profits and stock price.

About microsoft's dividends, one thing the article misses is that msft's payout is very high but most of it is via stock repurchases. The reality is that managements of all companies - tech or otherwise - concentrate on their own interests. That is why you see companies spending so much on stock repurchases rather than pure dividends. In theory it reduces the number of shares - but in practice it is a device to prop up the stock price so stock options or stock price linked benefits for employees and management are profitable. Microsoft spends disproportionately higher on stock repurchases compared to dividends. If they paid all that money as dividends, it would be a very decent dividend paying company.