Paying dividends is fine if you aren't firing workers or taking bailouts.

Why is firing workers inconsistent with paying dividends? They kind of feel like two sides of the same coin: a company can't find a better return on its capital so it divests itself of the resource (labor or cash).

It's not. It's just that these companies shouldn't get handouts.

Buy back stocks in the good times, issue new stock when the going gets rough.

Right now it's "buy back stocks in the good times, get bailouts then the bad times come".

One strategy is dividends.

Another is to buy a stock at X, sell later at Y and hope Y > X

Both are valid. Oddly they are taxed differently.

> Oddly they are taxed differently.

Most dividends are treated as 'qualified,' meaning that they are taxes as LT cap gains. So in that respect, the tax treatment is the same as selling the appreciated stock at a profit.

The big difference is that you're forced to pay taxes on a dividend the year you receive it, while you can theoretically defer capital gains taxes forever in a reinvestment scenario. Practically speaking though, most people own mutual funds that rebalance every year or so (think, S&P500 index fund), and pay out LT Cap Gains quarterly/yearly. So for most investors, there's not a huge difference between the two.

Additionally, there are schemes to allow for different tax treatment on dividends, such as capital dividends or stock dividends.