As Investopedia explains: “…a dividend is a distribution of a portion of a company’s earnings, decided by the board of directors, to a class of its shareholders. Dividends can be issued as cash payments, as shares of stock, or other property.”

What makes dividends even more attractive is the fact that reliable dividend paying companies pay them. In fact, some of most reliable dividend paying companies have only raised their dividends.

• Sysco (SYY) has paid a quarterly dividend since 1970.
• PPG (PPG) has raised its divided every year for the last 45 years.
• Dover Corp. (DOV) has raised its dividend for the last 67 years.
• 3M (MMM) has raised its dividend for the last 63 years.
• Procter & Gamble (PG) has raised its dividend for the last 65 years.

All are reliable dividend paying companies, with reliable growth and reliable dividends.

How Do Dividends Work?

A dividend is paid for every single share you own. For example, if you own 100 shares of a stock that pays a $2 annual dividend, you would receive $200 in dividends each year. Dividends can also pay out quarterly, monthly, or semiannually.

Look at Starbucks (SBUX), for example.

The company just approved an increase in its quarterly dividend from $0.45 to $0.49. If you own 100 shares of SBUX, you’ll receive a $49 dividend payment for the quarter—$196 annualized. The company also announced its dividend will be paid on November 26, 2021 to shareholders of record on November 12, 2021. That means you must hold the SBUX stock by November 12 at the latest, or you will not be eligible to receive payment on November 26, 2021.

What Types of Dividends Exist?

There are several types of dividends:

• The first is the cash dividend, which is the most common. Companies usually pay these cash dividends directly into a shareholder’s broker account.
• There are stock dividends. Instead of paying out a dividend in cash, companies can award shareholders will additional shares of stock.
• Special dividends are a way for a company to distribute profits to shareholders. However, unlike a cash dividend, special dividends are not recurring. Communications Systems (JCS), for example, just declared a special dividend of $3.50 per share, payable on October 15, 2021 to shareholders of record on September 30, 2021.

Again, one of the easiest ways to generate stable income is by investing in dividend-paying stocks. Not only are you guaranteed a dividend from companies with a strong history of payouts, but you get to invest in companies still witnessing strong growth after decades.