Dividends. They are a great way to slowly accumulate wealth.

So, dividends are very important. What are they? Here is the simplest definition I can come up with: a dividend is the distribution of additional company shares to its shareholders.

A little overview: Many companies and financial organizations offer shares to generate funds for the company. The investors invest in the company through these stock purchases. The investment decisions also depend on the reputation of the company. Getting some good returns in the form of a dividend is the motive behind these investments.

The shares bought by the investors provide them the status of an owner of the company. When the company makes a profit, a certain percentage of the profit is distributed among the shareholders according to the amount of shares of the company they own. These dividends are provided in cash or in the form of additional shares. These additional shares are known as a stock dividend.

There are several reasons for providing a stock dividend to the share holders. The company may have a shortage of cash. Because of this it becomes impossible for the company to provide cash to every shareholder. On the other hand, it is also possible that the company wants to invest more money from the earned profit into the company to raise the production level, thus they issue stock instead of cash.

There are several benefits of a stock dividend. Most importantly, no tax is charged on such dividends. If a shareholder receives some kind of stock dividend he or she is not entitled to pay any kind of tax on that until the additional shares are sold. On the other hand, this type of dividend provides the shareholder with additional ownership in the company which can provide more profit in the future. These are big pluses and the main reason why investors are attracted to the long term growth prospects of high-dividend yield stocks.

Another form of dividend that is provided to the shareholders is known as cash dividend. This dividend is paid in hard cash form or by check. The rules of this type of dividend is more or less same as the stock dividend. Here also the shareholder receives a certain part of the company's profit, which is decided according to the number of shares the shareholder holds. The investor can then decide whether or not to reinvest the cash into the company, by purchasing more shares, or simplay take the cash as a deposit into the brokerage account. Most of the time, people reinvest the money as to grow their investment, especially if the company's future looks bright.

Here are some dividend paying stocks that are popular buys.

-Pfizer (PFE)
-Duke Realty (DRE)
-Bank of America (BAC)
-Sempra Energy (SRE)
-Johnson and Johnson (JNJ)
-General Electric (GE)
-Pepsi (PEP)

Obviously, there are thousands of stocks that yield dividends. I would suggest doing a google search for dividend paying stocks and go from there.

Good luck!