Dividends serve as a distribution of a company's profits to its shareholders. When you invest in stocks, you essentially become a part-owner of the company, which grants you the potential to receive dividends—your share of the company's profits.

Companies opt to distribute dividends periodically, often on a quarterly or annual basis. This distribution is indicative of the company's financial stability and health. However, it's important to note that not all companies offer dividends; some may reinvest profits for growth or maintain reserves.

Typically, dividends are provided in cash. Nevertheless, there are instances where companies offer dividends in the form of additional shares. The amount received is proportionate to the number of shares owned. For instance, if a company pays a dividend of $0.25 per share and you possess 500 shares, your dividend income would amount to $125.

For investors seeking consistent returns from their investments, understanding dividend-paying companies and evaluating their financial health remains crucial.