Dividend per share (DPS) has long been a cornerstone of value investing, offering a tangible measure of a company's financial health and commitment to shareholders. It's the sum of declared dividends issued by a company for every ordinary share outstanding. The figure is calculated by dividing the total dividends by a firm, including interim dividends, over a period of time (a quarter or a year, typically) by the number of company's outstanding ordinary shares.

A company's DPS is often derived using the dividend paid in the most recent quarter, which is also used to calculate the 澳洲幸运5官方开奖结果体彩网:dividend yield.

Understanding Dividend Per Share (DPS)

DPS is an important measure for investors because the amount a firm pays out in dividends directly translates to income for the 澳洲幸运5官方开奖结果体彩网:shareholder. It's the most straightf🌟orward figure an investor can use to calculate their dividend payments from owning shares of a stock over time.

A consistent increase in DPS over time can also give investors confidence that the company's management believes that its growth in earnings can be sustained. Here is further information that investors can derive from the DPS:

1. Profitability and cash flow: A consistent or increasing DPS suggests that a company generates enough profits and cash flow to support regular dividend payments. This is a sign of financial stability.
2. Shareholder value: A higher DPS often means a company prioritizes rewarding its investors.
3. Dividend Policy: Changes in the DPS over time can reveal a company's dividend policy. Steady increases may suggest a commitment to growing shareholder returns, while cuts could mean the company is undergoing financial stress.
4. Dividend yield: When combined with the stock price, DPS helps calculate the dividend yield, allowing investors to compare the income potential of different stocks.
5. Maturity vs. growth stage: Established companies with stable cash flows often have higher DPS, while growth-oriented firms might have lower or no DPS as they reinvest profits.
6. Income reliability: For income-focused investors, a history of stable or growing DPS could suggest the firm is reliable for future dividends.

DPS Formula

$\begin{aligned} &\text{DPS} = \frac { \text{D} - \text{SD} }{ \text{S} } \\ &\textbf{where:} \\ &\text{D} = \text{sum of dividends over a period (usually} \\ &\text{a quarter or year)} \\ &\text{SD} = \text{special, one-time dividends in the period} \\ &\text{S} = \text{ordinary shares outstanding for the period} \\ \end{aligned}$​DPS=SD−SD​where:D=sum of&nb🔯sp;dividends&n♒bsp;over a period (usuallya quarter or year)SD=special, one🅠-time div𒈔idends in the periodS=ordinary shares&nbsไp;outst🔥anding for the period​

Dividends over the entire year, not including any special dividends but including interim dividends, must be added together to arrive at this figure. 澳洲幸运5官方开奖结果体彩网:Special dividends are only expected to be issued once and so are omittedꦐ. Interim dividends are dividends distributed to shareholders that have been declared and paid before a company has determined its annual earnings.

Suppose a company has issued common shares during the calculation period. In that case, the number of ordinary shares outstanding is generally calculated using the weighted average of shares over the reporting period, which is the same figure used for earnings per share (EPS).

For exa😼mple, suppose ABC company paid a total of $237,000 in dividends over the last year, during which a special oꦿne-time dividend totaled $59,250. Suppose it also has 2 million shares outstanding. As such, its DPS would be as follows:

($237,000-$59,250)/2,000,000 = $0.09 per share.

Other Financial Metrics

DPS is related to several financial metrics that take into account a firm's dividend payments, such as the payout and retention ratios. Given the definition of 澳洲幸运5官方开奖结果体彩网:payout ratio as the proportion of earnings paid as dividends to shareholders, DPS can be calculated by multiplying a firm's payout ratio by its (EPS). A company's EPS, equal to net income divided by the number of outstanding shares, can usually be found on a firm's income statement. The retention ratio, meanwhile, measures the proportion of a firm's earnings retained and, therefore, isn't paid out in dividends. 

Dividend Per Share Examples

A company that has a rising DPS is sending to the market a signal of a strong performance. For this reason, many companies that pay a dividend focus on adding to their DPS. As such, established dividend-paying corporations tend to have steady DPS growth. When charted, as can be seen in the charts below, these firms' DPS over time will look like a set of stairs.

Coca-Cola Co. (KO), for example, has paid a quarterly dividend since 1920 while consistently increasing its annual DPS. In 1996, it was $0.125. In 2000, it was $0.17. In June 2012, it was $0.51. Then, it saw a drop in the last quar💯ter of 2012 to $0.255. But this wasn't because of bad performance. Rather, in 2012, Coca-Cola implemented a two-for-one stock﷽ split. This means that for every share investors owned, they received an additional share. While this doubles the number of shares outstanding, it doesn't change the dividend they receive, which would be $0.51. That's why you should be careful when looking at a company's DPS over time. Many financial sites provide the "adjusted dividend," which standardizes the DPS over time to account for stock splits and the like.

As such, Coca-Cola continued its record, as it does to the present, of maintaining or increasing its dividend each quarter for decades (see below; hover over the chart to get the data for individual quarters).

This makes Coca-Cola one of the so-called澳洲幸运5官方开奖结果体彩网: dividend aristocrats: companies in the S&P 500 index that have increased th♑eir dividend payouts for at least 25 consecutive years. This is a prestigious group, as it demonstrates ▨a commitment to returning value to shareholders even during challenging periods.

Similarly, Walmart Inc. (WMT) has upped its annual cash dividend each year since it first declared a $0.05 dividend in March 1974. Since 2015, the retail giant has added at least 4 cents each year to its dividend per share, which was raised to $2.08 in 2019. In February 2024, Walmart announced an annual cash dividend for fiscal year 2025 of $0.83 per share on a post-stock split basis, a 9% increase.

Bottom Line

The DPS indicates the amount of cash a company returns to its shareholders for each outstanding share you own. Tඣo calculate the DPS, you divide the total dividen♏ds paid by the number of outstanding shares.

A higher DPS signals a company's strong financial health and commitment to returning value to investors, an essential consideration for income-focused investing. By understanding the DPS, you can compare different stocks on this basis and will be better able to choose those firms that best fit your investment needs and goals.