Definition
A payment a company or fund makes to shareholders, usually in cash, from its profits or income.
What it means
A dividend is a share of profits that a company decides to pay to its shareholders, often every quarter. Not all companies pay dividends, and those that do can cut or stop them. Mutual funds and ETFs also pass along dividends and interest from the investments they hold. You can take dividends in cash or reinvest them to buy more shares, which can compound growth. In a taxable account, dividends are taxable in the year paid even if reinvested. Qualified dividends, which meet holding-period and other rules, are taxed at the lower long-term capital gains rates of 0%, 15% or 20%, while ordinary dividends are taxed at regular income rates. Brokers report dividends on Form 1099-DIV. A dividend yield is the yearly dividend divided by the share price.
Example
Owning 200 shares that pay $0.50 per share each quarter brings $100 every three months, or $400 a year. At a $40 share price, the yield is 5%.
Illustrative numbers only. Your situation will differ.