The Key Difference Between Capital Gains and Dividends

capital gains vs dividends
Feature	Capital Gains	Dividends
Definition	Profit earned from selling an asset at a higher price than purchase price.	Periodic payments made by a company to its shareholders from profits.
Type of Income	Capital income or realized gain.	Dividend income or passive income.
Frequency	Occurs when asset is sold; irregular timing.	Paid regularly (quarterly, annually, etc.).
Taxation	Often taxed at capital gains tax rates, may vary by holding period.	Taxed as dividend income, sometimes at a different rate than capital gains.
Cash Flow	Cash inflow only when asset is sold.	Regular cash inflow without selling the asset.
Risk	Depends on market fluctuations affecting asset price.	Depends on company’s profitability and dividend policy.
Impact on Investment Value	Changes the value of the investment when realized.	Does not affect the investment’s market price directly.
Reinvestment	Requires selling and buying again to reinvest gains.	Can be reinvested automatically through dividend reinvestment plans.