[MaxPower]

No, it doesn't come out of the stock price, it comes out of the companies earnings.

You own part of the company so the company gives you a certain percentage of their earnings.

The company can either give their earnings to you or re-invest it in the business. Smaller fast growing companies tend to re-invest profits into the business, bigger more established companies tend to pay dividends. In my opinion dividends are usually better since most of the money that a company reinvest will be wasted and not generate growth (for big companies). Also if a company pays dividends it will be more difficult for them to fudge their earnings.

An excellent book on dividends is The Future for Investors by Jeremey Siegel.