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Dividend Per Share (DPS)

Dividend Per Share (DPS)

What Is Dividend Per Share (DPS)?

Dividend per share (DPS) is the sum of declared dividends issued by a company for each ordinary share outstanding. The figure is calculated by separating the total dividends paid out by a business, including interim dividends, throughout some undefined time frame, typically a year, by the number of outstanding ordinary shares issued.

A company's DPS is many times derived utilizing the dividend paid in the latest quarter, which is likewise used to work out the dividend yield.

Grasping Dividend Per Share (DPS)

DPS is an important measurement to investors in light of the fact that the amount a firm pays out in dividends straightforwardly means income for the shareholder. It is the most direct figure an investor can use to work out their dividend payments from possessing shares of a stock over the long haul.

A reliable increase in DPS over the long run can likewise give investors confidence that the company's management accepts that its earnings growth can be maintained.

DPS Formula

DPS=DSDSwhere:D=sum of dividends over a period (usuallya quarter or year)SD=special, one-time dividends in the periodS=ordinary shares outstanding for the period\begin &\text = \frac { \text - \text }{ \text } \ &\textbf \ &\text = \text{sum of dividends over a period (usually} \ &\text{a quarter or year)} \ &\text = \text{special, one-time dividends in the period} \ &\text = \text \ \end
Dividends over the whole year, excluding any special dividends, must be added together for a legitimate calculation of DPS, including interim dividends. Special dividends are dividends that are simply expected to be issued once and are, along these lines, excluded. Interim dividends are dividends distributed to shareholders that have been declared and paid before a company has decided its annual earnings.

In the event that a company has issued common shares during the calculation period, the total number of ordinary shares outstanding is generally calculated utilizing the weighted average of shares over the reporting period, which is a similar figure utilized for earnings per share (EPS).

For instance, assume ABC company paid a total of $237,000 in dividends over the course of the past year, during which there was a special one-time dividend totaling $59,250. ABC has 2 million shares outstanding, so its DPS is ($237,000-$59,250)/2,000,000 = $0.09 per share.

Special Considerations

DPS is connected with several financial metrics that consider a firm's dividend payments, for example, the payout ratio and retention ratio. Given the definition of payout ratio as the extent of earnings paid out as dividends to shareholders, DPS can be calculated by increasing a firm's payout ratio by its earnings per share. A company's EPS, equivalent to net income partitioned by the number of outstanding shares, is frequently effectively open through the firm's income statement. The retention ratio, in the mean time, alludes to something contrary to the payout ratio, as it rather measures the extent of a firm's earnings retained and thusly not paid out as dividends.

The possibility that the intrinsic value of a stock can be estimated by its future dividends or the value of the cash flows the stock will create later on makes up the basis of the dividend discount model. The model regularly considers the latest DPS for its calculation.

Dividend Per Share Examples

Expanding DPS is a decent way for a company to signal strong performance to its shareholders. Hence, many companies that pay a dividend center around adding to their DPS, so settled dividend-paying corporations will quite often flaunt consistent DPS growth. Coca-Cola, for instance, has paid a quarterly dividend beginning around 1920 and has reliably increased annual DPS since something like 1996 (adjusting for stock splits).

Essentially, Walmart has increased its annual cash dividend every year since it originally declared a $0.05 dividend payout in March 1974. Starting around 2015, the retail monster has added no less than 4 pennies every year to its dividend per share, which was raised to $2.08 for Walmart's FY 2019.

Highlights

  • A developing DPS over the long run can likewise be an indication that a company's management accepts that its earnings growth can be maintained.
  • Dividend per share (DPS) is the sum of declared dividends issued by a company for each ordinary share outstanding.
  • DPS is calculated by separating the total dividends paid out by a business, including interim dividends, throughout some stretch of time, normally a year, by the number of outstanding ordinary shares issued.
  • DPS is an important measurement to investors on the grounds that the amount a firm pays out in dividends straightforwardly means income for the shareholder.

FAQ

How Is DPS Calculated?

Dividends over the whole year, excluding any special dividends, must be added together for a legitimate calculation of DPS, including interim dividends. Special dividends are dividends that are simply expected to be issued once and are, thusly, excluded. Interim dividends are dividends distributed to shareholders that have been declared and paid before a company has decided its annual earnings. In the event that a company has issued common shares during the calculation period, the total number of ordinary shares outstanding is generally calculated utilizing the weighted average of shares over the reporting period, which is a similar figure utilized for earnings per share (EPS)

Why Is Dividend Per Share (DPS) Important to Investors?

DPS is an important measurement to investors in light of the fact that the amount a firm pays out in dividends straightforwardly means income for the shareholder. It is the most direct figure an investor can use to work out their dividend payments from possessing shares of a stock over the long run. A steady increase in DPS after some time can likewise give investors confidence that the company's management accepts that its earnings growth can be maintained.

What Is the Retention Ratio?

The retention ratio, likewise called the plowback ratio, is the extent of earnings held back in the business as retained earnings. It alludes to the percentage of net income that is retained to develop the business, instead of being paid out as dividends. It is something contrary to the payout ratio, which measures the percentage of profit paid out to shareholders as dividends. This measurement assists investors with deciding how much money a company is keeping to reinvest in the company's operations. Regularly, more up to date companies have high retention ratios as they are investing earnings back into the company to speed up growth.