If you’ve ever stared at your EasyEquities account wondering whether you should be chasing steady dividends or holding out for juicy capital gains, you’re not alone. It’s the investing version of deciding between eating now or saving your appetite for a braai later; both have perks, both come with trade-offs, and both can make you feel smug when it works out.
What Exactly Are Dividends?
Think of dividends as your investment paying you rent for sitting in your portfolio. A company makes profits, slices off a piece, and sends it to shareholders. Local favourites like ABSA, Exxaro, and Standard Bank have solid reputations for handing out these payouts.
The key metric here is dividend yield:
Annual dividend ÷ current share price.
So if a share pays R10 annually and trades at R200, you’re pocketing a 5% yield.
For some investors, dividends are like clockwork, a steady drip of passive income, perfect for retirees or anyone looking to offset the cost of that DSTV subscription you keep promising yourself you’ll cancel. And if you don’t need the cash? Reinvest it, and compounding works its magic.
Capital Gains – The Long Game
Capital gains are what you get when you buy low and sell high. Pick up Capitec at R1,200, sell at R1,700, and that R500 difference is your capital gain. Easy, right?
Not so fast. Growth-focused companies like Naspers or Prosus often skip dividends, instead reinvesting profits to grow the business. If it works, their share price climbs. If it doesn’t, well… ask anyone who bought Naspers ADRs at $35 during the tech slump and watched it crawl back above $60 months (or years) later.
Capital gains can be bigger than dividends, but they demand patience and nerves of steel. Markets are moody, like Eskom’s “planned” load-shedding schedules.
The SARS Factor
You can’t talk money without inviting SARS to the party.
Dividends get a 20% tax slapped on them immediately. If you’re due R1,000, you only see R800. Simple, but painful.
Capital Gains Tax (CGT) is a little trickier. You only pay when you sell at a profit. Only 40% of that profit counts toward your taxable income, taxed at your marginal rate. Plus, the first R40,000 a year is tax-free. Not flipping shares every month? You might not pay a cent.
Which One Should You Choose?
Dividends feel like payday, reliable, comforting, and immediate. Capital gains feel like a promotion, bigger rewards, but with waiting, stress, and the occasional political headline messing up your mood.
The real answer? You don’t have to choose. Smart investors diversify across both.
A balanced portfolio might include:
Dividend stocks: Exxaro, ABSA, or Satrix Divi Plus
Growth stocks: Capitec, Prosus, or global giants like Apple
Offshore dividend ETFs: SCHD, VYM
Total-market ETFs: S&P 500, MSCI World
Your mix depends on your age, goals, and risk appetite. At 25, you might swing for growth. At 55, income might look more appealing than chasing the next hot tech stock.
Stokvel Starter Pack of Stock Lingo
Dividends = regular payouts from profits. Taxed at 20%.
Capital Gains = profits from selling at a higher price. Taxed later, and only partly.
Reinvesting = compounding magic over time.
Smart Portfolios = don’t pick a side. Balance income and growth.
At the end of the day, it’s not about chasing one or the other. It’s about choosing smart, not just following your cousin’s WhatsApp crypto group.
While my jokes may be more unpredictable than Joburg traffic during school holidays, remember: this is not financial advice. Do your own research, chat to a licensed advisor.