Dividends are the payments from the income of a company to stockholders. Dividends are rewarded at regular intervals. You can easily learn how to calculate dividend per share using a formula. There is a simple formula to calculate dividends per share (DPS) which is given below:
Dividend per share (DPS) = (regular dividends in the time period – special dividends) / the number of shares of company stock in that duration of time.
Steps for calculation
- Collect all the information which is needed to find out dividend per share i.e. DPS. It is to be remembered that all the information must be of the same time duration. Dividend paid can be determined on the financial statement of cash flow. The denomination of the information on the information sheets should be noted.
Let us suppose for the example:
Regular dividend = $ 2,585,000,000
Special dividends = $ 0
Number of outstanding shares = 1.31B
- Put the information into the formula for DPS.
Dividend per share (DPS) = (regular dividends in the time period – special dividends) / the number of shares of company stock in that duration of time.
Here, as per example,
Dividend per share (DPS) = ($ 2,585,000,000 – $ 0) / 1, 310,000,000
- Now,
dividends per share (DPS) = ($ 2,585,000,000 – $ 0)/ 1,310,000,000
dividends per share (DPS) = $ 2,585,000,000 / 1,310,000,000
dividends per share (DPS) = $ 1.97 - Understand the result. Dividends are the resources by which a company distributes the share of profits to shareholders. Dividends normally are the percentage of net profit which is divided evenly among stocks.
- The second way to find dividends per share i.e. DPS is to take net income and multiply it by the payout ratio and then divide by the outstanding shares. Net income can be obtained by the earnings statement and the payout ratio can be found on the key statistics page.
As per example,
net income = $ 12,334,000,000
payout ratio = 21 %
outstanding shares = 1.31B
Now,
($ 12,334,000,000 x 0.21) / 1.31B = $ 2,590,140,000 / 1,310,000,000 = $ 1.97 - Using either way, you will get the same answer.
If investigating for relevant information, you may discover Net Income Avl to Common. This value is the net income with the following items deducted from it:
- Preferred dividends
- Other adjustments
- Earnings of discontinued operations
- Extraordinary items
- Accounting changes
It is the net income used to show only the value to the common shareholders. In this article, no use of Net Income Avl is made common for this detailed example.
I hope this article would have proved helpful to you in this context.
Related Tags: how to calculate dividends per share, how to calculate dividend, How to calculate DPS in accounting, how to calculate dividends in accounting, how to calculate dividend per share, how to calculate dividends in arrear, how to calculate dividends per share accounting 1, how to calculate stock price with an extraordinary dividend payout
Related Content: