Dividend per share (DPS) is the total amount a company pays in the form of dividend for each ordinary share.
The amount is calculated by dividing a company's total dividend paid out, including interim dividend, during a set period of time, generally a year, by the number of shares outstanding.
Let’s try to put these words in a formula:
DPS=(D-Sd)/S
DPS - a sum of dividends over a period
Sd - any special dividend in the period
S - Total number of outstanding shares
Simply put, dividend per share is total dividend declared in a year divided by the total shares outstanding.
Dividends paid throughout the year, excluding special dividends, must be summed together to calculate DPS, including interim dividends.
Special dividends are payouts that are intended to be issued just once and are hence excluded.
Interim dividends are dividends given to shareholders that were declared and paid before a company's yearly earnings were calculated.
For example, assume ABC company paid a total of Rs 10 m in dividends over the last year, during which there was a special one-time dividend totaling Rs 4 m.
ABC has 2 million shares outstanding,
So its DPS is
(10,000,000 - 4,000,000)/2,000,000 = 3
Hence it has a dividend per share of Rs 3.
Dividend per share is an essential statistic for investors since the amount a company pays out in dividends immediately correlates to shareholder’s income. It is the simplest statistic an investor may use to compute their dividend payments over time from holding shares of a firm.
A constant rise in dividends over time might help reassure investors that the company's management feels the profit growth will be sustained.
Since you’re interested in dividends, here’s how you can spot a dividend paymaster.
Also check out some screens for dividends on Equitymaster's stock screener:
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