There is a huge reason why tech firms don’t pay dividends: their employees have stock options. Unfortunately, although dividends paid to shareholders lower the share price, the strike price on employee options is not adjusted for the lower share price caused by dividend payments. Thus, paying dividends hurts the value of employee stock options, so tech firms that use options NEVER pay dividends.<p>Also, in terms of returning retained earnings to investors, there is no difference between a company paying dividends and a company repurchasing shares (assuming the shares are fairly valued). Happily, though, when a company repurchases shares, it doesn’t affect the strike price of stock options. Thus, tech firms don’t pay dividends and they repurchase shares instead. So in addition to the "dividend yield", we also need to add in all the capital that Microsoft spent on share repurchases, which was $47.7B in the fiscal year ending in June 2009 (<a href="http://www.microsoft.com/msft/reports/ar09/10k_fr_fin.html" rel="nofollow">http://www.microsoft.com/msft/reports/ar09/10k_fr_fin.html</a>). That ain’t nothing.<p>As an aside, Microsoft started paying dividends only after switching from using employee stock options to using restricted stock (the value of which isn’t affected by dividend payments).<p>These points aside, the author has a good point, which is that more tech firms should do more to return retained earnings to shareholders (whether via share repurchases or dividends).