Dividends are a small reward a company pays you for owning shares of its stock. The company takes a portion of its earnings, which it divides and distributes to shareholders.

Dividend as the name suggests is the part of profits earned by the company to the share holders. Many a times you find mid cap companies showing high profits and very high Earning per Share and traded at low PE Ratios. Stocks seems attractive and you dont know why it is traded for such a less price. A good way of looking and analyzing at it is what is the dividend paid by the company. This will clearly show you wether company has actually made profits or used other means to show profits.

A high dividend paying company is always worth keeping an eye at. A company which has earned good profits will definetely keep some cash for further investment and a part will be distributed to the share holders as dividend.

If the board of directors does decide to issue dividends, it will be announced at a set amount and will be paid to the shareholders as of a record date. Dividends will be paid on the distribution date, sometimes called the payable date. In order to receive the dividend, you must own shares of the stock on the record date.

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