Are dividends the same as capital gains?

A dividend represents a portion of a company’s earnings and the amount that you receive depends on the payout rate and the number of shares that you own.

A capital gain is the profit from purchasing a security at one price and selling it at a higher price.

An area of confusion for some is when a mutual fund makes a capital gains distributions at the end of the year. Some think of it as a dividend but it is not. It is the result the fund's realized capital gains from trading and these gains must be passed along to its shareholders.