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Correct me if I am wrong, but I believe an additional benefit is that the tax rate on dividends is substantially lower than that of capital gains.

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You're wrong. The long term capital gains tax rate in the U.S. is 15% for most people. The tax rate for "qualified" dividends (essentially, dividends on stock that you've held for awhile) is 15%. Starting in 2013, dividends will be taxed at your ordinary income tax rate (which is the way they used to be taxed), while long term capital gains will be taxed at 20%, which means that for most people, dividends will be more highly taxed than long term capital gains.

Ah. Thanks for the correction. The information I had must have been dated, looking here[1] it does appear that my information was old (probably from the 2003-2007 timeframe). I could have also been misremembering, and in fact the original data was probably comparing income tax to dividends tax. Good thing I am not an accountant!

It does seem that recent changes have again adjusted the tax rate. In fact, based on more information[2], it seems long term capital gains tax is in fact lower (while short term is the same as dividend tax).

[1]: https://secure.wikimedia.org/wikipedia/en/wiki/Dividend_tax#...

[2]: https://secure.wikimedia.org/wikipedia/en/wiki/Capital_gains...

(updated for formatting)

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