Most tech companies do stock buybacks rather than dividends. From the point of view of shareholders, it is almost the same thing.
Here are the differences. Dividends generate ordinary income, which people may have to pay taxes on. Dividends drop the price of the stock by the amount of the dividend.
By contrast a stock buyback reduces the value of the company and the outstanding stock by the same amount, and therefore leaves the stock price alone to first order effects. Over time this increases the likelihood of incurring long-term capital gains, which are generally better from a taxation purpose.
The never stated difference, which I think is important, is that dividends hurt anyone holding options, while a stock buyback increases volatility which helps anyone holding options. Since tech companies tend to have lots of employees with options, this matters a lot to them.
Here are the differences. Dividends generate ordinary income, which people may have to pay taxes on. Dividends drop the price of the stock by the amount of the dividend.
By contrast a stock buyback reduces the value of the company and the outstanding stock by the same amount, and therefore leaves the stock price alone to first order effects. Over time this increases the likelihood of incurring long-term capital gains, which are generally better from a taxation purpose.
The never stated difference, which I think is important, is that dividends hurt anyone holding options, while a stock buyback increases volatility which helps anyone holding options. Since tech companies tend to have lots of employees with options, this matters a lot to them.