Many people are looking for passive income, which is money people can earn without being actively involved. Investing in stocks that pay dividends is one of many ways to earn passive income. Dividends are payments shareholders receive from a company’s profits. Dividend stocks can create a stream of income for investors, or those payments can be reinvested to increase the likelihood of long-term growth. The Basics of Dividends Because they can pay shareholders income on a regular basis, dividend stock prices tend to be less volatile than others. A company’s board of directors determines whether a company pays dividends or reinvests profits into the company. They also determine how frequently dividend payments are made to shareholders. Dividends can be paid to shareholders in the form of cash or stock depending on the company. That said, cash payments are a more common form of dividend payment. Why do companies pay dividends? As a ‘thank you’ to investors for putting their dollars into the organization. When shareholders buy shares in a company, it gives that organization more cash to use towards growing their business. Dividends can be