It all depends... as has already been said!

Some background here may help before I comment.

We're retired, and have been for several years. We're both in our mid-sixties. Almost all of our investments are in IRA's from 401k's -- not because we chose that way, but because that simply was all we were able to do while also putting kids through college, etc.

I've managed my own IRA for several years now, including after I rolled a former 401k over into the IRA, and, if I do say so myself, have done quite well with a combination of long-term holdings (mutual funds and individual equities), some short term holdings, and even occasional day trades, all with the IRA. I pay just $8 per trade, which helps if I make trades fairly often, as I sometimes do.

Now, as for dividend-paying stocks, I cannot say which way is "better", but I will say that I have grown more and more interested in stocks that pay dividends AND continue to grow. (I, too, have some of the so-called "Can-Roy" stocks, mentioned by another poster, because they're growing AND paying nice dividends.)

TAXES -- CAPITAL GAINS TAXES vs INCOME TAX LATER

I have to say that, in our case, with a modest income mostly from Social Security, I've found that my income taxes are VERY small. In fact, we paid NO federal or state income taxes at all for 2 of the last 3 years, and only a few dollars this past year to the federal government. Each year, we have augmented our SS income with additional thousands withdrawn from my IRA, but still paid no taxes on those withdrawals, either.

So, is it better to take capital gains and pay taxes up front? Or wait, enjoy growth and dividends WITHIN an IRA, and risk paying INCOME taxes later? For us, the latter has been the best way, by far, but "it all depends" on your future living style, your future total income from all sources, etc.!

All I can suggest is that you learn, examine alternatives, and, above all, keep investing, one way or another!

Good luck.

Vermonter