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What are Dividends Per Share and how are Dividends Per Share Calculated?

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Question: What are Dividends Per Share and how are Dividends Per Share Calculated?
Answer:

Dividends per share are the amount of dividends that a publicly-traded company pays per share of common stock, over their reporting period, that they have issued. The remainder of the company's net income, that which is not paid out as dividends, is retained by the company for growth and is known as retained earnings. The proportion of earnings used to pay out as dividends to investors and retained by the company is called the dividend payout ratio.

Calculation of Dividends Per Share

Dividends Paid ($)/# Shares Outstanding Common Stock = Dividends Per Share

The annual dividend the company pays and the shares of stock outstanding can be found by looking at the company's annual report on a site like Annual Reports or on a financial site such as Yahoo Finance.

How Investors use Dividends Per Share

Investors generally use dividends as a signal. If dividends per share drop, then investors take that as a signal that the company is not doing well financially. It could mean a drop in the company's market value as investors sell off shares out of fear. The opposite is true if dividends per share go up. If dividends per share go up, it is often a signal that the firm is performing well financially.

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