Dividends. A stocks, "Yield"

The definition of 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. The dividend is most often quoted in terms of the dollar amount each share receives (dividends per share). It can also be quoted in terms of a percent of the current market price, referred to as dividend yield. 

Dividends are very important for long term investors, income investors, and well.... smart investors.  You can think of a dividend and the yield it provides like you think of the annual yield that you can get from a bank savings account.  Stocks are more risky then savings accounts and they offer better yields to their investors due to this risk.  If you bought $1,000 dollars worth of shares of AT&T you would get around a 5% annual yield.  These payments are normally made four times a year on a quarterly basis.  So after owning AT&T for one year you would own the shares you bought and if the share price stayed relatively the same you would also get $50 or 5% of the $1,000 that you invested.  The price of the stock could certainly go up and if that was the case you would have a very good investment on your hands.  Although 5% may not seem like much when compared to a "high yield" savings account with a bank it is huge.  I looked up Wells Fargo's high yield savings account and found that it offers a .05% yield.  So you would get $5 back from that savings account if you deposited $1,000;  ten times less then if you invested it in AT&T and the share price stayed the same.  The difference in bank account yields and stock yields is due to extremely low interest rates at this point in time.  When the economy gets hot be on the look out for high yielding savings accounts offered by banks.

Of course there are more risks with stocks then bank savings accounts.  The price of AT&T could go down and then you would end up losing money.  Companies can also decided that they do not want to or can not pay their investors the yield that they promised.  Generally though stocks with dividends that offer a yield are safer then other stocks.  If you want to make sure that the dividend issuing stock you like is safe you can do some research and find out how consistently the company has paid the yield it promises.  Good companies will have been consistent for years and years.  Dividends can protect stocks from going lower when the market gets bad because normally the lower a dividend stock goes the higher its yield gets.  This attracts more demand to buy the stock when the value falls and the yield rises.  This can help to hit the brakes when the stock price starts sliding.

It is definitely worth your time to look into stocks that have a dividend.  Over the last decade dividend stocks have outperformed the major averages, (Dow Jones, S&P 500, etc.).  These types of stocks can be real money makers for long term and income investors.