The Smart Investors

Dividends are paid to anyone who has some shares in a dividend paying stocks. The shareholders are normally paid dividends at the appropriate time. But to receive a dividend, you must own a stock.

Anyone who owns the shares on or before the record date is eligible, which makes dividends fair. But it is also important to know that companies can change or even cancel dividends if their earnings are low. So you can't always rely on them as guaranteed income.

Absolutely, dividends are nice but are always dependable based on the financial health of the company. While some companies are consistent in raising their dividends, indicating strength and growth, others may just as easily cut them in difficult times.

There are two major categories of shareholders entitled to dividends- ordinary and preference shareholders. The preference shareholders receive a predetermined rate of dividend. The ordinary shareholders are paid out of what remains after settling the preference shareholders. Ordinary shareholders may get nothing or little amount.