Comparing capital gain and dividend,which is more important to total return? which cause wider swing in return

Question

Comparing capital gain and dividend,which is more important to total return? which cause wider swing in return

Answer 1

That depends on the stock, the strength of the firm, and the market at the current time.

If the market place is weak, I would place less value on a promised dividend (which can always be suspended) to capital gain performance.

Answer 2

capital gains are an unknown quantity before the fact.  Dividends are a somewhat known quantity although they can be cut as several banks have been doing lately.  One interesting tid bit of informating is that a company that annually raises its dividend will also tend to realize capital gains as a result.  Of course both are dependent on an increase in earnings of the company.  

As one of your responders has already mentioned, one of the great advantages of capital gains is that no taxes are due on them until the asset is liquidated.  That can be a great advantage to preserving and increasing wealth.

Answer 3

Capital gains generally have a much greater effect on total return.  Most dividends are negligible - it is rare to see a dividend yield of more than 2-2.5%, and many are much lower.  The upside to dividends is that they are the most constant - companies hate to decrease their dividend, as the market usually sees this as a sign of distress, and as a result will sell off in droves, driving the stock price way down.  Cash-strapped companies will only cut their dividend as a last resort.

Capital gains are where the bulk of your return (or loss) will take place.

I hope that helps.

Answer 4

They both add to "total return".  Capital gain may be taxed at a more advantageous tax rate (USA).

Neither will cause a wider swing in return. (an argument could be made for the capital gain.... but that would be missing the point of what it is).

Read;

Mutual Funds For Dummy's

(you should not invest in anything you don't understand)

Answer 5

Really a hard question to answer since there are alot of variables to look at.  

I find both are important to my total return.  

With  Capital Gains as there is NO tax on these amounts until the shares are sold.  In Canada the Tax Rate on Capital Gains are 50%, of regular income, dividends are also taxed at a lower rate due to a Dividend tax credit, but the rate is still higher than with Capital Gains.

The nice thing about Dividends is you "have" the money/payment now, a stock price can drop and wipe out the Capital Gain.

I terms of swings the Capital Gain will cause larger swings as the market moves.  The return on Dividends should be more constant.  The only thing that will change is the yield will rise as a stock price falls .