The rationale is that a company that pays a dividend will have less remaining capital to work with. So, it should use it more carefully as well as look for ways to more efficiently run the business. Moreover, I'd like to add that dividends can be much more consistent than capital appreciation, especially when you stick with large-cap dividend payers, such as Telus Corporation ( TSX:T )( NYSE:TU ), which operate in perceived stable industries. Lower volatility O'Leary doesn't like volatility. He prefers to stick with less-volatile large caps and dividend payers. Indeed, dividend payers typically have lower volatility. Telus has a beta of about 0.5, which indicates it's about half as volatile as the market. For a 1% decline in the market, Telus is expected to decline 0.5%. One factor of lower volatility is that Telus pays a consistent dividend, which attracts long-term investors. These investors don't trade in and out of Telus and happily collect their dividend paycheques every three months.