There are only a few ways to earn from stocks. Dividends are one of them. When a company makes a profit, it either keeps the entire profit for future expansion or rewards its shareholders for the capital they provided to run the business. The board of directors makes the decision on how much dividend to pay to shareholders. Company dividend policy too plays an important role in dividend distribution, and it is not required for a company to distribute dividends. Assume a company has been in business for ten years and has earned handsome profits in many of those years, but recently has been unable to earn profits in the last few years for whatever reason. The company can still pay dividends by using its reserves or incurring debt.