A dividend is a distribution of a portion of a company's earnings paid to shareholders. Companies that generate consistent profits and have mature business models often pay regular dividends — typically quarterly — as a way to return value to investors.
For billionaires who own large stakes in dividend-paying companies, dividends can represent a significant and tax-efficient income stream. Warren Buffett, for example, receives hundreds of millions of dollars annually in dividends from Berkshire Hathaway's portfolio companies.
Dividend yield is calculated as the annual dividend per share divided by the share price. High dividend-paying sectors include utilities, consumer staples, and financials. Growth-focused tech companies typically do not pay dividends.