There is some cash hoarding (mostly overseas for tax reasons), but mostly what companies are doing are share buybacks. These are functionally equivalent to dividends but more tax efficient.
Buy-and-hold investors should desire dividends more than anyone else. Dividends allow the investor to determine where to reinvest profits, it's nice to have the option to hold your cash in something with returns better than t-bonds (which is how these companies hold their cash). Companies can go bankrupt, and it's better to have gotten a payout dividend payout rather than nothing. Borders did a huge stock buyback a few years before declaring bankruptcy. Plus, mountains of cash can entice managers into making poor investment decisions.
I'm absolutely pro-dividend because I've seen too many blue chips squander investors money. But if you're only in it for the short-term, then executives using cash-on-hand to artificially inflate the company's stock price works in your favor.
Yep, what the shareholders get is profit, what employees get is an expenditure.