Dividend Per Share (DPS) Calculator
Dividend Per Share:
What is Dividend Per Share (DPS)?
Dividend Per Share (DPS) is a vital financial metric that indicates the total amount of dividends declared by a company for every individual share of common stock outstanding. It is one of the most straightforward ways for an investor to determine how much cash income they are receiving for each share they own.
How to Calculate Dividend Per Share
The calculation is simple: you take the total amount of dividends distributed over a specific period (usually a year) and divide it by the number of outstanding shares. This does not include preferred shares if you are calculating DPS for common stockholders.
DPS = Total Dividends Paid / Total Shares Outstanding
Example Calculation
Imagine "TechCorp" decides to distribute $2,500,000 in dividends to its shareholders. The company currently has 500,000 shares of common stock held by investors. To find the DPS:
- Total Dividends: $2,500,000
- Total Shares: 500,000
- Calculation: $2,500,000 / 500,000 = $5.00
In this case, an investor holding 100 shares would receive $500 in total dividend income ($5.00 x 100).
Why DPS Matters to Investors
Investors look at DPS for several reasons:
- Growth Trends: A growing DPS over several years often signals a healthy, maturing company that is confident in its future earnings.
- Income Reliability: For "income investors," a steady or increasing DPS is a sign of a reliable stock for retirement or passive income.
- Yield Comparison: DPS is used to calculate the Dividend Yield (DPS divided by the current share price), which helps compare the income potential of different stocks.