Sometimes stocks are tactical buys rather than long term investment. where one acquires them for their dividends, keeps them for a medium term and sells them when they give modest capital gains. The question would then arise: why buy a stock for modest capital gains, when other stocks could provide a higher capital appreciation? The reason dividend-yielding stocks should be in your portfolio is that when markets are bearish or have a corrective phase, income from dividends ensures that once a stock reaches a certain dividend yield some institutional investors become buyers. For example a recently launched mutual fund which is focussed on investing in high dividend yielding stock would be a buyer the moment the stocks which it has identified come in range.
