When a corporation earns a profit, it can reinvest it in the business (called retained earnings) or pay it out to shareholders in the form of a dividend. Cash dividends are the most common, and shareholders receive dividends in proportion to their shareholding.
For example, if you own half a share of stock and the company announces a dividend of $4, you’ll receive $2 of cash in your Stockpile account.
Some companies pay dividends, while others do not. Those that do usually pay dividends quarterly (every three months), but may adopt a different schedule or declare a dividend at any time. Cash dividends are investment income that is usually taxable in the year they are paid.
There is no guarantee that a company that has previously declared dividends will continue to declare dividends in the future or that dividends, if declared, will remain at current levels or increase over time.