From Personal Finance for Dummies, page 209:
Dividends are income paid by investments. Both bond funds and stocks can pay dividends. Bond fund dividends (the interest paid by the individual bonds in a fund) tend to be higher (as a percentage of the amount you have invested in a fund). When a dividend distribution is made, you can receive it as cash (which is good if you need money to live on) or reinvest it into more shares in the fund. In either case, the share price of the fund drops to offset the payout. So if you’re hoping to strike it rich by buying into a bunch of funds just before their dividends are paid, don’t bother. You’ll just end up paying more in income taxes.
It is talking about mutual funds.
I've never played with stocks. However, I would like to know more about it. Does the bold text imply the stock price will drop because of a company giving out a dividend?