Understanding the difference between capital gains and dividend income can have an impact on portfolios and tax planning. That includes the difference in how these two incomes are taxed, says Investopedia in the article, “Capital Gains vs. Dividend Income: What's the Difference?”
Capital is the initial sum invested. A capital gain is a profit you get when an investment is sold for a higher price than the original purchase price. An investor doesn’t realize a capital gain until an investment is sold for a profit.