What kind of profit distribution do some stocks pay to their shareholders?

The correct answer is dividends, which are a form of profit distribution paid by a corporation to its shareholders. When a company generates a profit, it may choose to share a portion of that profit with its investors in the form of dividends. This payment can be made in cash or as additional shares of stock, providing a direct financial benefit to shareholders. Companies that pay dividends often do so on a regular basis, such as quarterly or annually, which can make them attractive to investors seeking regular income alongside potential capital appreciation.

Other terms like interest, royalties, and returns have different meanings in the context of investing and finance. Interest typically refers to the cost of borrowing money or the return earned on certain fixed-income investments, such as bonds. Royalties are payments made to creators or inventors for the continued use of their intellectual property. Returns generally refer to the overall gain or loss on an investment, which can encompass capital gains, dividends, and interest. Understanding dividends and how they function is essential for evaluating the potential income generated by different types of investments.