Dividends per Share Formula (Table of Contents)
- Dividends Per Share Formula
- Dividends Per Share Calculator
- Dividends Per Share Formula in Excel (With Excel Template)
Dividends per Share Formula
The formula for calculating Dividends per Share Formula is as follows:
Where,
The annual dividend is the total amount of dividend paid to the shareholders for holding each share of the company, it is paid out at the end of the financial year.
The number of shares is the outstanding number of shares held by all the shareholders of the company. This number tells us how many shares are currently owned by the shareholders i.e., investors of the company. The investors can be categorized as insiders, institutional investors, and ESOPs. Outstanding shares figures are available on a company’s balance sheet. Outstanding shares can be used in the calculation of earnings per share of a company, market capitalization of a company or cash flow per share.
Examples of Dividends per Share Formula
Example #1
Anand Group Pvt Ltd announced a total dividend of $750,000 to be paid to shareholders in the closing financial year. The company 200000 shares outstanding in its balance sheet.
We can calculate Dividend per share by simply dividing the total dividend to the shares outstanding.
- Dividends per Share Formula = Annual Dividend / No. of Shares Outstanding
- Dividend per share = $750,000 / 2,000,00
- Dividend per share= $3.75 dividends per share
Example #2
Let’s assume Jagriti Financial Services paid a total of $2,50,000 dividends over the last one year, they have also provided the special one-time dividend of $47500 to the existing shareholders during. Jagriti Financial Services have 200000 shares outstanding. We have to calculate the Dividend per share paid by Jagriti Financial Services.
We can calculate the Dividend per share by using the formula
Dividends per Share Formula = (sum of dividends paid – special dividends) / shares outstanding
For this we have to calculate the Annual Dividend, which can be calculated as:
Annual Dividend = Total Dividend paid – Special One-time Dividend
- Annual Dividend = $(2,50,000-47,500)
- Annual Dividend = $2,02,500
Therefore, now we will calculate Dividends per share Formula
- Dividends per Share Formula = Annual Dividend / No. of Shares Outstanding
- Dividend per share = $2,02,500/2,00,000
- Dividend per share = $1.01 dividend per share
Example #3
Anand Group of Company has paid annual dividends of $5,000. Outstanding Stock at the beginning was 4000 and Outstanding stock at the end it was 6000. We have to calculate the dividend per share of Anand Group of a company.
In the above example, we can find out the average outstanding shares by using the simple average:
- Outstanding stock = 4000
- Ending outstanding stock = 6000
By using a simple average, we can get the average outstanding stock,
- Average outstanding stock = (Beginning Outstanding Stock + Ending Outstanding Stock)/2
- Average outstanding stock = (4000 + 6000) / 2 = 10,000 / 2 = 5000.
- Average outstanding stock= 10,000 / 2
- Average outstanding stock= 5000.
And, the annual dividends paid were $5000.
Using the Dividend per share formula, we get:
- Dividends per Share Formula = Annual Dividend / No. of Shares Outstanding
- Dividends per Share = $5,000 / 5000 .
- Dividends per Share = $1 per share
Hence, we got the Dividends per Share Formula is $1 per share
Explanation
Dividend per share is the total amount of dividends issued to the shareholders for every share of equity stock by the company.
In the Dividends per Share Formula, the most important point is the “Number of shares”. For the calculation of Numbers of shares outstanding, we can either find the average outstanding shares by using the simple average of the beginning and ending shares or else, we can use a weighted average. The method of calculating the Numbers of shares depends on the approach of the company, i.e. we can use the weighted average method if the company pay the dividend in the month of January and issue new shares in the month of December.
The other point of the Dividend per share formula is Annual Dividend, i.e., Dividends paid to the investors over the entire year, it does not include any special dividends. However, interim dividends are included in the calculation of the Annual Dividend.
Special dividends are not included in the annual dividend as it’s paid only once and it’s not a regular payment to the stockholders.
Interim dividends are included in the annual dividend as they are the dividend paid to shareholders that have been declared earlier and has been paid before a company’s annual dividend payout.
Significance and Use of Dividends per Share
For an investor prospect, it is important to understand the concept of dividend per share. Dividends per share demonstrate the investors How the company uses its income. The amount of dividend paid to the Investors can be found in the financial statements of the company. For investors, the dividend per share is the easiest method to calculate the expected dividend payment amount the company will be giving. Lower Dividend per share doesn’t mean that there is no growth potential for the company. For analyzing the growth potential of any company, we need to calculate the financial ratios and the dividend yield.
Dividends per share and the formula explained above can be used by the investors looking to invest in any company. Investors can evaluate stocks on the basis of pay-out of dividends and invest in the company accordingly. This formula alone cannot provide an overall view of a company’s performance as some companies retain their earnings for organic/inorganic growth instead of paying out dividends. A company with lower dividend payout ratio, i.e. a Dividend paid to stockholders (Proportion of net income) is very low, these companies will reinvest their net income which will lead to increase in the company valuation and future expansion.
Dividends per share can also be used for calculating other financial formulas, Example- Annual Dividend and No. of Shares Outstanding.
Dividends per Share Calculator
You can use the following Dividends Per Share Calculator
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| No. of Shares | |
| Dividends per Share Formula= | |
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Dividends Per Share Formula in Excel (With excel template)
Here we will do the same example of the Dividends Per share in Excel. It is very easy and simple. You need to provide the two inputs i.e Annual Dividend and No. of Shares Outstanding
You can easily calculate the Dividends Per share using Formula in the template provided.
In, this template we have to solve the Dividends Per share formula
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This has been a guide to Dividends Per Share Formula, here we discuss its uses along with practical examples. We also provide you with Dividends Per Share calculator along with downloadable excel template.
