Forbes is running an interesting article on increased pressure for tech companies to increase dividends.

Basically, what has happened in the last several decades is that tech companies would hord all of their profits in these massive war chests. The problem is that companies often end up using these big war chests for rather absurd purchases. As such the companies end up consuming themselves. The corporations hording cash tend to squander their wealth.

Giving the money back in the form of dividends lets the investor decide how and where to reinvest or spend the profits. One advantage of dividends is that it forces the investor to actively reinvest or spend the cash.

The other way to distribute profits is for a company to buy back shares.

One big conflict is dividends deflate employee options. This creates an internal conflict for companies. Issuing a dividend reduces the the value of the options of the people that you actually work with.

BTW, this is one of the reasons why I don't think options are that good of a deal for employees. There are too many ways for the corporation to manipulate the corporate stock. Such imbalances also make for ugly politics. The stock holders (the actual owners of a company) have the added incentive for pushing for dividends in lieu of buy backs since the dividend decreases the total compensation received by the workers.

I am no longer a fan of employee options or employee ownership.
Personally, I think it is best for employees to minimize their investment in their company so that they are not dependent on a single income stream.