When might an investor prefer to receive cash dividends over stock dividends?

An investor might prefer to receive cash dividends over stock dividends primarily when they are in need of current income from their investments. Cash dividends provide immediate liquidity that investors can use for their personal expenses or to reinvest in other opportunities. In contrast, stock dividends do not provide any immediate cash flow since they merely increase the number of shares owned without generating cash. This is especially important for retirees or individuals relying on investment income for living expenses, who benefit from receiving cash payouts to meet their financial needs.

Furthermore, when an investor requires cash, the option to receive shares as dividends may not be beneficial, as it ties their wealth to the company's future performance without offering immediate financial benefits. Cash dividends are a straightforward way for companies to distribute profits to shareholders, aligning well with those looking for regular income.

Other options may indicate scenarios where stock dividends could be appealing, such as when reinvestment opportunities are high or when profits are low, but these do not fulfill the immediate cash requirement that defines the preference for cash dividends.