Can you explain why you differentiate the two (price changes vs dividends)? AFAIU it’s really just that you have to instruct one to be sold to realize it and the other just shows up in your account, but the overall returns, tax implications, and such are basically the same.
Not sure what jurisdiction you're in, but the tax implications are not 'basically the same' here in the UK.
Capital gains are taxed at 20% and can be offset against personal losses, whereas dividend income is typically taxed at 32.5 - 38%, and that's after the company issuing the dividend already paid corporation tax of 19% on their end.
According to this source [0], the first £2000 of dividend income per year are tax free. So depending on how much dividend income you have, the rates could be higher or lower than in the US (who has no such exception, but lower rates on dividends for stocks held over a year).
The US. Where I believe cap gains taxes apply to both cap gains and dividends. Which honestly makes sense me — either you “cash out” individually or the company does it for you (to pay the dividend).
From what you say, dividends seem like a negative thing taxes-wise, so why would any company opt pay them out? I’m sure there’s some intricacy there.
In the UK it doesn't matter. Even dividends paid inside an accumulating fund or ETF are still considered income and, if held outside of a tax sheltered account, you're supposed to (somehow) figure out how much income tax to pay and declare it.
Most people get away with doing this because they use tax sheltered accounts, or the amount would be below their tax-free allowance.
The most important reason: PAPER PROFITS ARE NOT REAL PROFITS.
More technical reasons follow.
The risk profile is very different. Rents, dividends, and interest payments all have some notion of a guaranteed payment. Your risk is primarily whether your counter party will be able to honor that agreement. This is why bond investing is often called "fixed income" because you know ahead of time how much money you'll make.
Asset appreciation has immense market risk. You need to find a buyer willing to pay more for what you paid for it. In the case of companies the economic risk are higher too: if the companies cashflows dwindle or debt increases the shares are fundamentally worth less.
This is why there are often tax distinctions between guaranteed income streams and capital investments: in theory, a government wants to encourage investment in risk and discourage printing guaranteed monthly checks. This does create a regulatory arbitrage, however, where companies can buy fixed amounts of their own stocks to guarantee some amount of appreciation in lieu of a dividend.
