Final answer:
Shareholders can generate a return through dividends and capital gains. Dividends are direct payments from firms to shareholders, while capital gains are profits made from selling the stock at a higher price than it was bought.
Step-by-step explanation:
Shareholders purchase shares seeking to generate a return which may be realized in two primary ways. First, through dividends, which are direct payments made by a firm to its shareholders. Secondly, through capital gains, which occur when an investor sells a stock for more than they paid for it. For instance, if an investor buys a share of stock in Wal-Mart for $45 and later sells it for $60, they realize a $15 capital gain.
It's important to note that while both dividends and capital gains can contribute to the overall return an investor sees, the way, timing, and amount of return can vary widely. Firms may decide whether or not to pay dividends and stock prices can fluctuate significantly, affecting the potential for capital gains.