Very good observation! If I were to calculate beta for US company stock, then, yes, I would tend to think including dividends makes sense. In US, dividends are more predictable (if you think beyond the 2008/2009 dividend cuts). In emerging countries like India, two issues (1) it is difficult to include because they are not that uniform, it could be more or it could be less; and (2) generally, it is distributed only once in full year, this makes it insignificant – Yes I have tried calculating it, the difference is of the order of 0.001.

Best Wishes,