Dividends provide investors with passive income, making them a key component of long-term wealth-building strategies. They indicate a company’s financial stability and profitability, as businesses with strong earnings are more likely to sustain regular payouts. Dividend reinvestment can enhance portfolio growth by compounding returns over time. Many retirees rely on dividend income to supplement their financial needs without selling assets. Additionally, dividend-paying stocks tend to be less volatile than non-dividend stocks, offering stability during market downturns.