Dividend Per Share
Dividend per share (DPS) is the sum of declared dividends issued by a company for every ordinary share outstanding. The figure is calculated by dividing the total dividends paid out by a business, including interim dividends, over a period of time, usually a year, by the number of outstanding ordinary shares issued.A company's DPS is often derived using the dividend paid in the most recent quarter, which is also used to calculate the dividend yield.
Definition: Dividend Per Share (DPS) refers to the total dividends declared by a company for each share of common stock over a certain period (usually a year). It is calculated by dividing the total dividends paid by the company (including interim dividends) by the number of outstanding common shares. DPS is often derived from the most recent quarterly dividend payment and is a key metric for calculating dividend yield.
Origin: The concept of DPS originated with the development of corporate dividend policies. As early as the 19th century, with the proliferation of joint-stock companies, companies began returning part of their profits to shareholders through dividends. Over time, DPS became an important indicator of a company's profitability and shareholder returns.
Categories and Characteristics: DPS can be divided into common stock dividends and preferred stock dividends.
- Common Stock Dividends: These are dividends paid to common shareholders, typically determined by the company's profitability and the board of directors' decisions. Common stock dividends are variable and may fluctuate with the company's performance.
- Preferred Stock Dividends: These are fixed dividends paid to preferred shareholders, who have priority over common shareholders in dividend payments. Preferred stock dividends are usually fixed and not affected by the company's performance.
Specific Cases:
- Case 1: A company paid a total of 10 million yuan in dividends in 2023, and the total number of outstanding common shares is 5 million. The company's DPS is:
DPS = Total Dividends / Total Common Shares = 10 million yuan / 5 million shares = 2 yuan per share. - Case 2: A company paid a dividend of 0.5 yuan per share in the first quarter of 2023, 0.6 yuan per share in the second quarter, 0.7 yuan per share in the third quarter, and 0.8 yuan per share in the fourth quarter. The company's annual DPS is:
Annual DPS = 0.5 yuan + 0.6 yuan + 0.7 yuan + 0.8 yuan = 2.6 yuan per share.
Common Questions:
- Question 1: Will DPS increase every year?
Answer: Not necessarily. The increase in DPS depends on the company's profitability and the board of directors' decisions. If the company's profits increase and the board decides to increase dividends, DPS may increase; otherwise, it may decrease. - Question 2: How to calculate dividend yield?
Answer: Dividend Yield = DPS / Share Price. For example, if a company's DPS is 2 yuan and the current share price is 40 yuan, the dividend yield is:
Dividend Yield = 2 yuan / 40 yuan = 5%.
