A dividend is a payment made by a company to its shareholders from its profits. When a company earns a profit, it can either reinvest the money back into the business or distribute a portion to shareholders as dividends. Dividends are usually paid in cash, but they can also be issued as additional shares of stock.
Companies that regularly pay dividends are often well-established and financially stable. For example, if a company declares a dividend of $2 per share and you own 100 shares, you would receive $200. Dividends are typically paid quarterly, though some companies pay them annually or semi-annually.
Dividend-paying stocks are popular among investors who want a steady income stream in addition to potential capital gains. The dividend yield — the annual dividend divided by the stock price — is a key metric investors use to evaluate the attractiveness of dividend-paying investments.