Dividend Per Share Formula & Definition Explained

What is Dividend Per Share

Dividend per share is an amount of the dividends that the company paid out to the shareholder per share. The dividend per share (DPS) measures how much the dividend they receive as a return on investment for every single share the investor has. Thus, the higher dividend per share means the company paid more dividends for each share and vice versa.

The growing DPS is a good sign to signal a better performance. However, a low dividend per share is not always a bad thing if the company is able to make a profit and reinvest with its cash flow from the operational activities to grow the company further.

The company’s dividend per share is often used as an indicator of how well it has been managed, and as a benchmark for other companies in the same sector. For the investors, the dividend per share is often used as an analytical tool in the stock market to find a good performance stock that pays out good dividends to invest in.

Dividend Per Share Formula

The dividend per share is calculated by dividing the company’s annual dividends by the shareholders’ equity outstanding as the following dividend per share formula:

• DPS = Annual dividends / Shareholders’ equity Outstanding

However, if the company issued common shares during the year, the total shareholders’ equity outstanding needs to be re-calculated to use the “average shareholders’ equity outstanding” value instead.

where:

• The annual dividend is a sum of the total dividends paid over a year.
• Average shareholders’ equity outstanding = (Shareholders’ equity at the beginning period + At the ending period) / 2

or with the following alternative divided per share formula:

• DPS = Earnings Per Share / Dividend Payout Ratio

For example, the Feriors company has the annual dividends of $100,000 and the shareholders’ equity outstanding of 200,000 in the last year. The dividend per share of the Feriors company will be: 100,000 / 200,000 = 0.5

The dividend per share of 0.5 means the investors will receive $0.5 (or 50 cents) per share they have.

Frequently Asked Questions