1. As an investor yourself, would you rather a firm pays you a lot of dividends or would you rather simply earn capital gains? In other words, would you rather your return for investing in a firm’s stock come from quarterly cash dividends or stock price appreciation? Why?
If I had to choose dividends or stock price appreciation, I would prefer a stock repurchase. When a company buys back shares, investor`s ownership percentage rises without any tax consequences. Unlike a cash dividend, a stock repurchase gives the decision to the investor. An investor can choose to tender his shares for repurchase, accept the payment and pay the taxes. With a cash dividend, a stockholder has no choice but to accept the dividend and pay the taxes.
In addition, stock repurchases offer companies more flexibility than dividends. Once a dividend is put in place, it might have a big negative if the dividends are decreased or ceased in the future. In contrast, if a company stops repurchasing shares, it is hardly noted. Moreover, companies usually initiate a share repurchase when the stock is estimated to be undervalued. A company`s management team knows its business and relative stock price very well, and it is unlikely that it would purchase its stock at a high price.

2. Given historically dividends result in higher taxes for individual investors than capital gains, why have firms still paid dividends?
A company that pays dividends forms a positive image and sends good signals to the shareholders about the firm`s sustainability. It may also attract investors that prefer companies that pay dividends. For example, a cash dividend is to be paid at specified times (usually quarterly), however a stock repurchase is not. For some investors, the dependability of the dividend may be more important.
Also, I think that dividends help to avoid wasting firms’ cash on not necessarily needed or