What is Dividend per share?

Dividend per share

Dividend per share (DPS) is a simple and intuitive number. It is the amount of the dividend that shareholders have (or will) receive, over an year, for each share they own.

DPS = total dividends paid ÷number of shares in issue

Dividends are paid to holders of shares on the "record date" which will be announced beforehand by the company. More important from an investor's point of view is the ex-dividend date on, and after, which shares bought or sold on a stock exchange under normal terms will be sold without the dividend (so that the seller will get the dividend).

Companies may pay interim dividends during the year as well as a final dividend. These should all be added together to get the total annual amount in order to calculate DPS, dividend yield and other ratios.

Special dividends may also be declared. They main significance of a dividend being declared a special dividend is that this is a signal to investors that it is not part of a company's normal dividend policy and therefore does not indicate that future similar dividends will be paid annually, as is otherwise the case. These should not be included in the DPS or when calculating dividend yield, but should be looked at separately.

Most companies avoid dividend cuts unless their financial condition demands it or there has been some other change in the business or its capital structure. As a result of this, increases in the dividend are taken to be a sign that the management is confident that the new level can be maintained or improved on.