Dividend Per Share – DPS

Bond Equivalent Yield – BEY

What is the dividend per share?

The dividend per share (DPS) is the sum of the dividends declared issued by a company for each ordinary share in circulation. The figure is calculated by dividing the total dividends paid by a business, including interim dividends, over a period of time by the number of outstanding common shares issued. A company’s SDP is often calculated using the dividend paid in the last quarter, which is also used to calculate the dividend yield.

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What is a dividend?

Dividend per share explained

DPS is an important measure for investors because the amount a company pays in dividends translates directly to shareholder income, and DPS is the simplest figure that an investor can use to calculate its payments. dividends by holding shares of a share on time. Meanwhile, an increasing DPS over time can also be a sign that a company’s management believes that its profit growth can be sustained.

The DPS can be calculated using the following formula, where the variables are defined as:

The

DPS=reSouth DakotaSor:re=sum of dividends over a period (generallya quarter or a year)South Dakota=one-off exceptional dividends over the periodS=common shares outstanding for the period begin {aligned} & text {DPS} = frac { text {D} – text {SD}} { text {S}} \ & textbf {where:} \ & text {D } = text {sum of dividends over a period (generally} \ & text {a quarter or a year)} \ & text {SD} = text {one-off exceptional dividends over the period} \ & text {S} = text {common shares outstanding for the period} \ end {aligned}

TheDPS=SreSouth DakotaTheor:re=sum of dividends over a period (generallya quarter or a year)South Dakota=one-off exceptional dividends over the periodS=common shares outstanding for the periodTheThe

Example of calculation of the SDR with special and intermediate dividends

Dividends for the whole year, excluding special dividends, must be added together for a correct calculation of the PSD, including interim dividends. Special dividends are dividends which should only be issued once and are therefore not included. Intermediate dividends are dividends distributed to shareholders that have been declared and paid before a company has determined its annual profit. If a company issued common shares during the calculation period, the total number of common shares outstanding is generally calculated using the weighted average of the shares during the reporting period, which is the same figure used for the earnings per share (EPS).

For example, suppose that ABC has paid a total of $ 237,000 in dividends in the past year, during which there was a special one-time dividend totaling $ 59,250. ABC has 2 million shares outstanding, so its EPS is ($ 237,000 to $ 59,250) / 2,000,000 = $ 0.09 per share.

Concrete examples of DPS

Increasing the PSD is a good way for a company to signal a strong performance to its shareholders. For this reason, many companies that pay a dividend focus on increasing their DPS, so established companies that pay dividends tend to show steady growth in DPS. Coca-Cola, for example, has paid a quarterly dividend since 1920 and has consistently increased the annual SDR since at least 1996 (by adjusting stock splits). Likewise, Walmart has increased its annual cash dividend each year since it first declared a dividend of $ 0.05 in March 1974. Since 2020, the retail giant has added 4 cents per year to its dividend per share, which was raised to $ 2.08 for Walmart’s 2019 fiscal year. .

DPS and other financial parameters

The DPS is linked to several financial parameters which take into account the dividend payments of a company, such as the distribution rate and the retention rate. Given the definition of the payout ratio as the proportion of profits paid in the form of dividends to shareholders, the EPS can be calculated by multiplying the payout ratio of a company by its earnings per share. A company’s EPS, equal to net income divided by the number of shares in circulation, is often easily accessible via the company’s income statement. The retention rate, on the other hand, refers to the opposite of the distribution rate, since it rather measures the proportion of the profits of a company retained and therefore not paid in the form of dividends.

The idea that the intrinsic value of a security can be estimated by its future dividends or the value of the cash flows that the security will generate in the future constitutes the basis of the dividend discount model. The model generally takes into account the most recent DPS for its calculation.

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