# Dividend Per Share - DPS

## What is 'Dividend Per Share - DPS'

Dividend per share (DPS) is the sum of declared dividends issued by a company for every ordinary share outstanding. Dividend per share (DPS) is the total dividends paid out by a business, including interim dividends, divided by the number of outstanding ordinary shares issued. A company's DPS is usually derived using the dividend paid in the most recent quarter, which is also used to calculate the dividend yield. DPS can be calculated by using the following formula:

D - Sum of dividends over a period (usually 1 year)
SD - Special, one time dividends
S - Shares outstanding for the period

## BREAKING DOWN 'Dividend Per Share - DPS'

DPS is important because the number one goal of a company is to return value to its shareholders. Investors receive value through dividend payments and the price of the stock itself, which is equal to a company's total expected future dividend payments. Therefore, a company's profits, and the amount it pays out in dividends, drives shareholder value.

DPS, in its simplest form, can be calculated by the following. First, a company's net income per share is derived as (net income) / (outstanding shares). Once that number is found, its DPS is derived as (net income per share) x (payout ratio). The payout ratio is equal to the amount of income paid in dividends divided by the total net income.

## Example of DPS With Special and Interim Dividends

Dividends over the entire year, not including any special dividends, must be added together for a proper calculation of DPS, including interim dividends. Special dividends are dividends which are only expected to be issued once and are not included. Interim dividends are dividends distributed to shareholders that have been declared and paid before a company has determined its annual earnings.

The total number of ordinary shares outstanding is sometimes calculated using the weighted average over the reporting period. For example, ABC company paid a total of \$237,000 in dividends over the last year of which there was a special one-time dividend totaling \$59,250. ABC has two million shares outstanding, so its DPS is (\$237,000-\$59,250)/2,000,000 = \$0.09 per share. Having a growing DPS can be a sign that the company's management believes that the growth can be sustained.

## Real World Example of DPS

Increasing DPS is a great way for a company to signal strong performance to its shareholders. For this reason, many companies that pay a dividend focus on adding to its DPS. For example, Occidental Petroleum Corp. announced plans to increase its DPS from \$0.75 to \$0.76 on July 14, 2016. This represents an annualized dividend yield of 3.96%. The market responded favorably to the news, and the company's share price increased by 0.6% on July 14, 2016.