What is Dividend Per Share ?
803 reads · Last updated: December 5, 2024
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. This figure is calculated by dividing the total dividends paid by the company (including interim dividends) over a period (usually a year) by the number of outstanding common shares. A company's DPS is often derived from the most recent quarterly dividend paid, which is also used to calculate the dividend yield.
Origin
The concept of dividends dates back to the early development of corporate shareholding, when companies began distributing profits to shareholders. Over time, dividend payments became a key indicator of a company's financial health and shareholder returns. DPS, as a specific metric, helps investors assess a company's performance in terms of shareholder returns.
Categories and Features
DPS can be categorized into common stock dividends and preferred stock dividends. Common stock dividends are paid to common shareholders after profits are made, while preferred stock dividends are fixed returns received by preferred shareholders before company profits. The main features of DPS include its stability and growth potential, often reflecting the company's profitability and cash flow status.
Case Studies
For example, Apple Inc. has maintained a steady growth in DPS over the past few years, reflecting its strong profitability and cash flow management. Another example is The Coca-Cola Company, known for its long-term stable dividend payments, attracting many investors seeking stable income.
Common Issues
When analyzing DPS, investors often face issues such as evaluating the sustainability of dividends and how to consider them in conjunction with the company's overall financial condition. A common misconception is that a high DPS is always good, but in reality, excessively high dividends might indicate that the company lacks sufficient funds for reinvestment.
