Dividend Per Share (DPS) - Financial Glossary

Overview

Dividend Per Share is the total amount of dividend attributed to each individual share over a period of one year. It is a way of measuring the total amount of dividend paid by the company for each share outstanding.

Alternative Names: DPS

Formula

Dividend Per Share (DPS) = Total Dividends Paid ÷ Shares Outstanding

Calculation: For the calculation of the DPS, we take the total amount of dividend paid over the period of one year and we divide it by the number of shares outstanding. This gives us the dividend amount attributed to each individual share.

Alternative Method: An alternative way of calculating DPS is to multiply the Earnings Per Share (EPS) by the Dividend Payout Ratio. This approach uses the relationship between earnings, payout percentage, and dividends to arrive at the same result.

Calculation Example

Let's calculate the dividend per share for a hypothetical company to demonstrate the process:

Example Company - Financial Data:

Total Dividends Paid (Annual): $5,000,000
Shares Outstanding: 10,000,000

Calculate Dividend Per Share

Dividend Per Share (DPS) = Total Dividends Paid ÷ Shares Outstanding

DPS = $5,000,000 ÷ 10,000,000

= $0.50 per share

Interpretation: A DPS of $0.50 means that each share receives $0.50 in dividends over the year. For an investor holding 1,000 shares, they would receive $500 in annual dividend income ($0.50 × 1,000 shares). This per-share format makes it easy to calculate expected dividend income based on the number of shares owned and to compare dividend payments across different companies regardless of their total size.

How to Interpret

Dividend Per Share is best interpreted by examining trends over time and comparing with the stock price to calculate dividend yield. The absolute dollar amount of DPS varies by company, so focus on growth patterns and yield rather than comparing DPS values across companies.

Types of Dividend Payments:

Cash Dividends (Most Common)

Dividends are usually paid in the form of cash payment paid to investors. This is the standard and most common type of dividend distribution, providing shareholders with direct cash income that can be reinvested or used for other purposes. The DPS amount reflects the cash received per share owned.

Stock Dividends

This is when the company, instead of cash, gives investors a certain number of extra shares based on the current amount of shares that each shareholder owns. For example, a 5% stock dividend means shareholders receive 5 additional shares for every 100 shares owned. This increases share count while preserving company cash.

Scrip Dividends

This is when the company promises payment to shareholders at a later date. The company issues promissory notes or certificates instead of immediate cash, allowing the company to defer the cash outflow while still declaring a dividend. Shareholders receive the payment when the scrip matures.

Liquidating Dividends

The company liquidates all its assets and pays the sum to shareholders as a dividend. This is usually done when the company is about to shut down. These dividends represent a return of capital rather than distribution of earnings, as the company is essentially distributing proceeds from selling off the business.

Income Calculation: To calculate your total annual dividend income, multiply the DPS by the number of shares you own. For example, if DPS is $2.00 and you own 500 shares, your annual dividend income is $1,000 ($2.00 × 500 shares). Compare the DPS growth rate over multiple years to assess dividend sustainability and company commitment to shareholder returns.

Why It Matters

Dividend Per Share is essential for income-focused investors and provides important insights into a company's financial policies and shareholder value creation through dividends.

Key Insights:

Income Measurement: DPS measures the total amount of dividend paid by the company for each share outstanding. This allows investors to easily calculate their expected annual dividend income by multiplying DPS by the number of shares they own. For portfolio planning and retirement income strategies, knowing the exact dividend per share is essential.
Per-Share Standardization: By expressing dividends on a per-share basis, DPS makes it intuitive to understand the dividend income for any investment size. Whether you own 10 shares or 10,000 shares, you can quickly calculate your total dividend income. This standardization also allows for easier comparison of dividend growth rates over time regardless of share splits or other structural changes.
Dividend Policy Indicator: Changes in DPS over time reveal management's commitment to returning value to shareholders. Consistent DPS growth demonstrates financial strength and shareholder-friendly policies, while cuts or suspensions may signal financial distress. Tracking DPS trends helps investors assess the sustainability and reliability of dividend income.
Dividend Yield Calculation: DPS is used to calculate dividend yield by dividing DPS by the stock price. This yield metric allows investors to compare the income-generating potential of different stocks and assess whether the dividend return is attractive relative to the stock's price. Higher DPS relative to price means higher yield and more income per dollar invested.

Key Takeaways

Dividend Per Share (DPS) is total amount of dividend attributed to each individual share over period of one year
Way of measuring total amount of dividend paid by company for each share outstanding
Formula: Dividend Per Share (DPS) = Total Dividends Paid ÷ Shares Outstanding
Alternative calculation: multiply Earnings Per Share (EPS) by Dividend Payout Ratio
Dividends usually paid in form of cash payment paid to investors (most common type)
Stock dividends: company gives investors extra shares instead of cash based on current shares owned
Scrip dividends: company promises payment to shareholders at later date
Liquidating dividends: company liquidates all assets and pays sum to shareholders, usually done when shutting down
DPS allows easy calculation of dividend income by multiplying DPS by number of shares owned
Per-share format makes intuitive to understand dividend income for any investment size
DPS trends over time reveal management commitment to returning value to shareholders
Used to calculate dividend yield by dividing DPS by stock price
Higher DPS relative to price means higher yield and more income per dollar invested

Related Financial Ratios

These related metrics provide additional insights for comprehensive financial analysis:

Dividend Payout Ratio

Measures percentage of earnings paid out as dividends. While DPS shows the absolute dollar amount per share, the payout ratio shows what proportion of earnings is being distributed. Together, they provide both the amount paid (DPS) and the sustainability of that payment (payout ratio). An alternative way to calculate DPS is to multiply EPS by the Dividend Payout Ratio.

Book Value Per Share

Shows equity value per share (total assets minus total liabilities divided by shares outstanding). While DPS measures income distributed per share, book value per share measures the equity or net asset value backing each share. Both are per-share metrics that help investors understand what they receive (DPS as income) versus what they own (book value as equity).

Dividend Yield

Calculated as DPS divided by stock price, showing the return on investment from dividends. Dividend yield is directly derived from DPS and expresses the dividend as a percentage of the stock price. For example, if DPS is $2.00 and stock price is $40, dividend yield is 5%. DPS provides the numerator for calculating dividend yield, making it essential for income-focused investment decisions.