One of the reasons shares are bought is to receive an income. Each time the listed company has profits at the end of each year, they pay a share of the profits to their shareholders, which is called a dividend.

I know this is not rocket science for many people, but you would be surprised how many people don’t understand different parts of shares. Wikipedia’s definition of a dividend sums it up quite well:

Dividends are payments made by a corporation to its shareholders. It is the portion of corporate profits paid out to stockholders. When a corporation earns a profit or surplus, that money can be put to two uses: it can either be re-invested in the business (called retained earnings), or it can be paid to the shareholders as a dividend. Many corporations retain a portion of their earnings and pay the remainder as a dividend.

These dividends can be paid franked or unfranked. Franked means that the shares have had the tax paid on the earnings already, and unfranked means the tax hasn’t.