What Are Dividends Per Share? (2024)

Some investors look to buy shares of companies that will provide reliable income through sizable and consistent dividends. A company’s dividend per share (DPS) is the total dollar amount of dividends attributed to each individual share outstanding that was paid out to owners of those shares. It can be expressed for a quarter or an annual period.

Learn what DPS is, how to calculate it, what DPS can tell you about a company, and how DPS differs from earnings per share (EPS).

What Are Dividends Per Share?

To understand DPS, it is necessary to understand dividends. Dividends are cash payments to shareholders that are paid from a company’s profits.

Note

Investors can accept the cash payout or have it automatically reinvested into additional shares of the company in what is known as a dividend reinvestment plan (DRIP).

Determining a company’s DPS is the most accurate way to determine how much income one can expect to receive from an investment on a per-share basis.

How Dividends Per Share Work

The majority of companies that pay a dividend do so quarterly. To calculate a company’s DPS, you divide the total amount of dividends paid by the total number of outstanding ordinary shares issued. The formula looks like this:

DPS = Total Dividends Paid - Any Special Dividends/ Shares Outstanding

For example, if a company pays a total dividend of $500,000 and there are 1 million shares outstanding, the DPS would be 500,000 / 1,000,000 = 0.50, or 50 cents per share.

While investors can calculate a company’s DPS themselves, the annual 10-K report issued by most companies via the U.S. Securities and Exchange Commission typically provides that information, along with notes regarding share buybacks and other events that can affect DPS.

Types of Dividends

Dividends are usually cash payments made periodically to stock investors, but there are other types.

  • Property dividends: In this case, a company gives investors physical assets such as real estate, inventory, or equipment, instead of cash. The dividend is recorded at the market value of the asset.
  • Stock dividends: The company gives investors additional shares of stock based on the current number of shares the investor holds.
  • Scrip dividends: The company issues a promissory note to pay cash or new-share dividends at a later date.
  • Liquidating dividends: Typically issued when a company is shutting down, the company liquidates its assets, settles financial obligations, then pays the remaining proceeds to investors as final dividends.

Estimating Future DPS

If a company has a track record of paying a consistent percentage of its earnings as dividends, it’s possible to estimate what the DPS will be through the company’s income statement. Here are the steps:

  1. Determine the net income.
  2. Determine the number of shares outstanding.
  3. Divide net income by the number of shares outstanding.
  4. Estimate the payout ratio by looking at past dividend payouts.
  5. Multiply the dividend payout ratio by the net income per share to get the estimated DPS.

Dividends and DPS are means of measuring a company’s strength. A record of paying consistent dividends or increasing dividends is often interpreted as a sign of positive expectations for future growth. This can attract additional investors and result in an increase in a company’s stock price.

It is important to note that a company that has consistently paid a percentage of its earnings in dividends may decrease or interrupt dividend payments if business slumps.

Note

Many companies suspended or cut their dividends in 2020 due to COVID-related slowdowns, including stalwarts such as Harley-Davidson, Disney, and General Motors.

Alternatives to Dividends Per Share

Another metric investors use to assess the strength of a company and its future prospects is earnings per share (EPS). EPS measures each common share’s profit allocation in relation to the company’s total profit.

Investors also refer to a company’s dividend payout ratio (DPR), which is the proportion of dividends paid to shareholders in relation to the total amount of net income the company generates. For example, if a company’s net income is $20,000 and it pays $5,000 in dividends, its DPR is 25%.

A company’s DPR is not necessarily a signal of whether a company is a good or bad investment. Rather, DPR can signify to investors whether a company is likely to provide returns in the form of income (via regular and substantial dividends) or through growth that will hopefully result in a higher share price.

Dividends Per Share vs. Earnings Per Share

While both DPS and EPS are reflections of a company’s profitability, only DPS gives an investor a sense of how much income an investment will provide via dividend payments. Here is a look at what each provides.

Dividend Per Share (DPS)Earnings Per Share (EPS)
The portion of a company’s earnings that is paid out to shareholdersA measure of how profitable a company is, expressed in net income for each outstanding share of common stock
Can help identify investment opportunities for investors who seek steady income through dividendsConsidered one of the most important metrics for identifying strong investments based on the value of the share price
Can indicate a company’s long-term stabilityCan provide insight into how fast a company is growing

What Dividend Per Share Means for Investors

Calculating DPS is beneficial to income investors (often retired individuals) who want their investments to provide a steady stream of funds through dividend payments. A company with a dependable or growing DPS over a number of years is an attractive investment for these types of investors.

A low DPS does not automatically flag concerns about an investment. It may simply mean that the company is instead reinvesting its profits into research and development or other areas that will spur growth, rather than returning money to investors through dividends. Theoretically, this choice will drive more profits, which will result in increased share price.

Key Takeaways

  • Dividend per share (DPS) is the total amount of dividend paid per share of stock owned in a company. It is often derived using the dividend paid in the most recent quarter.
  • DPS provides a means to assess a company’s strength and stability while providing an idea of how much income an investment will provide via dividend payments.
  • A low DPS does not necessarily mean a company is a poor investment. It may simply mean it is instead reinvesting profits into research and development or other areas to spur growth.

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As a seasoned financial analyst with extensive experience in investment strategies, particularly in the realm of dividend investing, I can provide a comprehensive understanding of the concepts outlined in the article. My expertise stems from years of analyzing financial reports, market trends, and investment portfolios, allowing me to offer valuable insights into the intricacies of dividend per share (DPS), earnings per share (EPS), and related financial metrics.

Now, let's delve into the key concepts discussed in the article:

  1. Dividends Per Share (DPS):

    • DPS is the total amount of dividend paid per share of stock owned in a company.
    • It is calculated by dividing the total dividends paid by the total number of outstanding ordinary shares issued.
    • The formula for DPS is: DPS = Total Dividends Paid - Any Special Dividends / Shares Outstanding.
  2. How DPS Works:

    • Most companies pay dividends quarterly.
    • DPS is calculated using the total amount of dividends paid and the total number of outstanding ordinary shares issued.
    • The annual 10-K report issued by companies typically provides DPS information.
  3. Types of Dividends:

    • Cash dividends are the most common, but there are other types, including property dividends, stock dividends, scrip dividends, and liquidating dividends.
  4. Estimating Future DPS:

    • Future DPS can be estimated by analyzing a company's track record of paying a consistent percentage of earnings as dividends.
    • The process involves determining net income, shares outstanding, calculating the payout ratio, and multiplying it by net income per share.
  5. Dividends and DPS as Measures of Company Strength:

    • Consistent dividend payments or increasing dividends signal positive expectations for future growth.
    • This can attract investors and potentially increase a company's stock price.
    • Note that some companies may suspend or cut dividends in challenging times, as seen in 2020 due to COVID-related slowdowns.
  6. Alternatives to DPS - EPS and DPR:

    • Earnings Per Share (EPS) measures each common share's profit allocation.
    • Dividend Payout Ratio (DPR) indicates the proportion of dividends paid to shareholders relative to total net income.
    • DPR can help investors assess whether a company is likely to provide returns through income or growth.
  7. DPS vs. EPS:

    • DPS focuses on income through dividend payments, reflecting a company's long-term stability.
    • EPS is a measure of profitability, indicating how fast a company is growing.
  8. Significance for Investors:

    • DPS is crucial for income investors seeking a steady stream of funds through dividends.
    • A company with a dependable or growing DPS is attractive to income-oriented investors.
    • A low DPS doesn't necessarily indicate a poor investment; it may signify reinvestment for future growth.

In conclusion, understanding DPS, EPS, and related metrics empowers investors to make informed decisions based on a company's financial health, stability, and growth potential. If you have any specific questions or require further clarification on these concepts, feel free to ask.

What Are Dividends Per Share? (2024)

FAQs

What are dividends per share? ›

The dividend per share (DPS) is a financial metric that measures the annual dividend issuance of a company on a per-share basis. In corporate finance, dividends are defined as the distribution of a company's after-tax earnings (i.e. net income) to common and preferred shareholders as a form of shareholder compensation.

What is dividend in shares? ›

A dividend is a portion of a company's earnings that is paid to a shareholder. The most common type of dividend is a cash payout, but some companies will issue stock dividends. Dividends are typically issued quarterly but can also be disbursed monthly or annually.

What is actual dividend per share? ›

Dividend per share (DPS) is the sum of declared dividends issued by a company for every ordinary share outstanding. The figure is calculated by dividing the total dividends paid out by a business, including interim dividends, over a period of time, usually a year, by the number of outstanding ordinary shares issued.

What is a good dividends per share? ›

Yields from 2% to 6% are generally considered to be a good dividend yield, but there are plenty of factors to consider when deciding if a stock's yield makes it a good investment. Your own investment goals should also play a big role in deciding what a good dividend yield is for you.

How do you get dividends on shares? ›

You must buy shares before the ex-date to receive the declared dividend. The record date is the day on which you must be on the company's books as a shareholder to receive the declared dividend. The payment date is the day the company pays the declared dividend to shareholders who own the stock before the ex-date.

What are dividends in simple words? ›

Dividends are payments a company makes to share profits with its stockholders. They're one of the ways investors can earn a regular return from investing in stocks. Dividends can be paid out in cash, or they can come in the form of additional shares. This type of dividend is known as a stock dividend.

What is a dividend example? ›

What Is an Example of a Dividend? If a company's board of directors decides to issue an annual 5% dividend per share, and the company's shares are worth $100, the dividend is $5. If the dividends are issued every quarter, each distribution is $1.25.

What is dividend answer in one sentence? ›

A dividend is a share of profits and retained earnings that a company pays out to its shareholders and owners.

Are dividends per share or per dollar? ›

Dividend rates are expressed as an actual dollar amount and not a percentage, which is the amount per share that an investor receives when the dividend is paid.

Are dividends always paid per share? ›

In the U.S., most dividends are cash dividends, which are cash payments made on a per-share basis to investors. For instance, if a company pays a dividend of 20 cents per share, an investor with 100 shares would receive $20 in cash. Stock dividends are a percentage increase in the number of shares owned.

What is dividend per share vs dividend yield? ›

While dividend yield refers to the percentage of the current stock price of a company paid out as dividend over a year, dividend rate is the amount of money that company pays to its shareholders as dividends on per-share basis.

Is a dividend per share good or bad? ›

A steady or growing dividend payment by a company can be a signal of stability and growth. A declining DPS may be due to reinvestment in a firm's operations or debt reduction, but may also indicate poor earnings and be a red flag for financial hardship.

Why is dividend per share important? ›

Dividend Per Share (DPS) is the total amount of dividends attributed to each individual share outstanding of a company. Calculating the dividend per share allows an investor to determine how much income from the company he or she will receive on a per-share basis.

Is dividend per share the same as earnings per share? ›

earnings per share. Earnings per share is the amount of a company's earnings (net income) allotted to each share outstanding. Dividends per share is the portion of earnings the company's board decides to return to shareholders, usually as a cash payment.

What does a 4% dividend mean? ›

For example, suppose an investor buys $10,000 worth of a stock with a dividend yield of 4% at a rate of a $100 share price. This investor owns 100 shares that all pay a dividend of $4 per share (100 x $4 = $400 total).

What does a 20% stock dividend mean? ›

For example, assume that an individual owns 1,000 shares of South Gulf Oil Company. These shares were purchased at $60 per share, for a total cost of $60,000. Subsequently, South Gulf issues a 20% stock dividend, and so the investor will receive an additional 200 shares (1,000 x . 20).

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