Answer: Stock dividends.

## Explanation **Correct Answer: B - Stock dividends** Let's analyze each option: **A. Cash dividends** - This is a source of return from investing in equities. Cash dividends represent actual cash payments made by companies to shareholders, providing direct income. **B. Stock dividends** - This is NOT a source of return from investing in equities. Stock dividends involve issuing additional shares to existing shareholders without any cash payment. While they increase the number of shares held, they do not increase the total value of the investment (the share price typically adjusts downward proportionally). Stock dividends are essentially a paper transaction that redistributes ownership without creating economic value. **C. Change in the market price of equities** - This is a source of return from investing in equities. Capital appreciation (or depreciation) resulting from changes in stock prices represents a significant component of total return for equity investors. ### Key Concepts: 1. **Total Return from Equities** = Capital Appreciation + Dividend Income 2. **Stock dividends** are different from **cash dividends** - stock dividends don't provide immediate economic benefit 3. The three main sources of equity returns are: - Dividend income (cash dividends) - Capital gains (price appreciation) - Reinvestment of dividends ### Why Stock Dividends Don't Create Return: - When a company issues a stock dividend, shareholders receive more shares but the total market capitalization remains the same - The share price adjusts downward proportionally (e.g., 10% stock dividend reduces share price by approximately 9.1%) - No new value is created; it's merely a change in the number of shares outstanding Therefore, stock dividends are not a source of return, making option B the correct answer.

Author: LeetQuiz .