Dividends are the payments companies make to their shareholders. If you receive a dividend, you'll have to pay taxes on it -- but how much you pay will depend on whether or not the dividend is a qualified one. Choosing stocks that pay qualified dividends can significantly reduce your tax bills -- and the bigger your dividends are, the more you'll save.
A dividend is qualified if it meets certain requirements, namely:
It was paid either by a U.S. corporation or by a qualified foreign corporation (foreign corporations qualify if they are incorporated in a U.S. possession, are located in a nation covered by an income tax treaty with the U.S., or their stock is readily tradable in the U.S. securities market).
Source: Fool.com