What are dividends in relation to investments?

Dividends represent a portion of a company's profits that are distributed to its shareholders. When a company earns profit, it has the option to reinvest that money back into the business for growth, pay off debt, or return a share of those profits to its shareholders in the form of dividends.

This practice is a way to reward shareholders for their investment and allows them to earn money on top of any appreciation in the stock price. Dividends can provide a steady income stream for investors, making stocks more attractive, especially for those seeking regular income rather than solely capital appreciation. Understanding dividends is crucial for anyone involved in investments as they can be a significant part of total returns, particularly in long-term investment strategies.