Capital gains vs. dividends: What's the better option?

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• Sharp Asset Management Inc.

• Capital Gains vs. Dividends Demystifying Your
  Investment Returns

• 416-722-9009

• contact_at_sharpasset.com

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• What Are Capital Gains?

• Capital gains are the profit that individuals or
  businesses make when they sell an asset, such as
  stocks and bonds, land, an investment property, a
  cottage, a building, or equipment used for a
  business.
• Generating capital gains is a good thing. It
  means the initial investment has grown in value
  and you earned a profit after the sale.

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• What Is a Dividend?

• A dividend is a portion of a company's profit
  that is distributed to its shareholders.
• Think of dividends as a kind of reward for
  shareholders for believing in the company and
  investing their money in it.

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• Difference Between Capital Gains and Dividends

Feature Capital Gains Dividends
Definition Profit earned by selling an investment or asset for more than the purchase price. A portion of a company's profits distributed to its shareholders.
Example Scenarios Selling stocks at a higher price than you bought them, selling real estate (excluding your principal residence in Canada) for a gain. A company like Apple distributing a portion of its profits to its shareholders.
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• Difference Between Capital Gains and Dividends

Feature Capital Gains Dividends
Frequency One-time event triggered by the sale of the investment/asset. Regular payments (quarterly or annually) determined by the company's board of directors.
Taxation 50-67 of the capital gain is included in taxable income. In Canada, dividends can be taxed as ordinary income or as qualified dividends. Qualified dividends generally receive a lower tax rate.
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• Difference Between Capital Gains and Dividends

Feature Capital Gains Dividends
Control Investor decides when to sell the asset. Company decides the payout amount and frequency.
Additional Considerations Short-term capital gains may be taxed at a higher rate. Dividends may not be guaranteed and can fluctuate depending on the company's performance.
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• Are Capital Gains or Dividends Good for Income
  Seekers?

• Capital gains are generally not considered ideal
  for income seekers. Here's why
• Capital gains One-time profit from selling
  investments, not a steady income source like
  dividends.
• Unpredictable timing You control when you sell,
  but market conditions and asset performance
  determine the timing and amount of your capital
  gains. This makes it difficult to rely on them
  for consistent income.
• Tax implications While 66.7 of capital gains
  are included in taxable income in Canada if
  annual income from them is greater than 250,000,
  they can still be taxed at a higher rate than
  qualified dividends.

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• Contact us

• 21 Greenwin Village Road Toronto, Ontario, M2R 2R9

• P.O BOX 74539 Humbertown Centre,
• 270 The Kingsway Toronto, ON M9A 5E2

• 416-722-9009

• contact_at_sharpasset.com

• www.sharpasset.com

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• Thank you