Simplifying things quite a lot, say that you have a share in a stable company priced at $1000. During the year the company makes $50 per share in profits and th

Simplifying things quite a lot, say that you have a share in a stable company priced at $1000. During the year the company makes $50 per share in profits and the price gradually goes up to $1050. The company can pay a dividend: you get $50 and pay taxes on them (and your share is now worth $1000). The company could also use the money to buy its own shares: you still have a share worth $1050 and no tax is due (yet).