Which characteristic does not apply to common stocks?

Common stocks are a type of security that represents ownership in a corporation, and they come with specific characteristics. One defining characteristic of common stocks is that they provide shareholders with ownership rights in the company, which includes the potential for profits in the form of dividends, as well as a stake in the firm’s assets if it is liquidated. However, dividends on common stocks are not guaranteed; they are paid at the discretion of the company's board of directors and depend on the company’s profitability and financial condition. This means that shareholders may not receive dividends in every financial period, as companies may decide to reinvest profits back into the business instead.

Furthermore, common stocks are typically issued in small denominations, allowing for easier purchase and transferability among investors. Shareholders also have the right to transfer ownership of their shares, making common stocks highly liquid compared to other forms of investment.

In summary, the correct answer identifies that common stocks do not guarantee dividends. This distinguishes them from fixed-income securities like bonds, where interest payments are required. Understanding this aspect of common stock is crucial for investors when evaluating potential risks and returns in the stock market.