Difference between Dividend and Capital Gain
Basis |
Dividend |
Capital Gain |
---|---|---|
Meaning |
Dividend is a portion of a company’s earnings or profits that is distributed to its shareholders. |
Capital Gains are the profits realized from the sale of investments such as stocks, bonds, or real estate. |
Source |
Dividends are generated from the company’s earnings. |
Capital Gains arise when there is appreciation in the value of an investment. |
Necessity |
Dividends depend on the decision made by senior management. |
Capital Gains depend on the macroeconomic factor. |
Nature |
Dividend is considered as a regular income. |
Capital Gain is considered as a form of investment income. |
Preferred By |
Dividends are preferred by income-oriented investors seeking regular income. |
Capital Gains are preferred by growth-oriented investors looking for appreciation in their investment value. |
Taxation |
A lower amount of tax is charged on dividends. |
High amount of tax is charged on capital gains. |
Payment Timing |
Dividends are usually paid out quarterly or annually. |
Capital Gain is realised when an asset is sold. |
Reinvestment |
Dividend earned can be reinvested into more shares of the same company. |
Capital Gain earned can be reinvested into other assets, but not get automatically reinvested in the same asset. |
Difference between Dividend and Capital Gain
Dividends and Capital Gains are two ways in which investors can earn returns on their investments, particularly in stocks and other securities. However, they represent different sources of income and are derived from different aspects of investment performance. Dividends are distributions of a company’s profits to its shareholders. Capital Gains, on the other hand, are the profits realized from the sale of investments such as stocks, bonds, or real estate.