When a company makes money they have the option of either keeping their profits for themselves or giving it to their investors who hold stock. If the company is not into sharing, and would rather keep their profits, they are said to be retaining earnings. While this may be good for the company, it is probably not your preferred method of dealing with profits.
Most stockholders like when the company decides to give back to their investors. Companies give back to their stockholders by paying out dividends. These are handed out to the investors based on the number of shares that they own. Because you get a set rate for each share that you own, you will get more dividends if you own ore shares. The big shareholders get more, while the average shareholders need to get by on smaller profits. In the lean times, the average stockholder may not get enough dividends to make it worthwhile to hold onto the stock.
If you want to get into the stock market, you need to pay attention to how often these dividends are paid out. After all, these are essentially your profits as a shareholder. Some companies pay out on a regular basis, while others do not pay out at all. Check the fine print before you purchase.
One thing that you will need to check for is if the company you have chosen pays out with cash or stock dividends. Stock dividends are a good option if you are not too attached to the idea of cash in your wallet. These dividends are paid out as additional shares of stock to the shareholders. Sometimes, companies choose this option if they do not have the ready cash on hand to pay their investors. Stock dividends are a way to promise their investors that they will be making money in the future, even if they are not able to pay at the moment. Some companies also feel that stock dividends increase the liquidity of the stock and encourage people to buy and sell. The idea is that a lower priced stock is easier for most people to purchase than a higher priced stock.