Good correction, thanks. For completeness, that’s dividends on stocks, but not dividends on bonds, which are treated like interest.
In any case, dividends are taxable in the current year, and unrealized stock gains are not.
In case the difference doesn’t seem like a big deal, consider that if you die without selling the stocks, your heirs inherit them at the prevailing price, and no one ever pays tax on the gain they made between when you bought them and when you died.
Rich people who need neither dividend cash or stock sales to pay living expenses prefer not to get dividends so they can pay very little tax.
This enormous loophole for the rich brought to you by your US representatives.
Correct. That's part of the tax efficiency, the whole point for some investors.
Even if you set your dividends to automatically reinvest via a DRIP program, you still pay taxes on dividends in the year in which they are issued. This reduces the effect of compounding.
> plus the stock
The key point in a buyback is that each share of stock becomes worth more because the company is divided into fewer units. So each share is worth more than it would be had the case instead been used to pay dividends.