## What Is Dividend Per Share?

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 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.

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## Dividend Per Share Explained

DPS is an important metric to investors because the amount a firm pays out in dividends directly translates to income for the shareholder, and the DPS is the most straightforward figure an investor can use to calculate his or her dividend payments from owning shares of a stock over time. Meanwhile, a growing DPS over time can also be a sign that a company's management believes that its earnings growth can be sustained.

DPS can be calculated by using the following formula, where the variables are defined as:

﻿\begin{aligned} &\text{DPS} = \frac { \text{D} - \text{SD} }{ \text{S} } \\ &\textbf{where:} \\ &\text{D} = \text{sum of dividends over a period (usually} \\ &\text{a quarter or year)} \\ &\text{SD} = \text{special, one-time dividends in the period} \\ &\text{S} = \text{ordinary shares outstanding for the period} \\ \end{aligned}﻿

## Example of Calculating 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 that are only expected to be issued once and are, therefore, not included. Interim dividends are dividends distributed to shareholders that have been declared and paid before a company has determined its annual earnings. If a company has issued common shares during the calculation period, the total number of ordinary shares outstanding is generally calculated using the weighted average of shares over the reporting period, which is the same figure used for earnings per share (EPS).

## DPS and Other Financial Metrics

DPS is related to several financial metrics that take into account a firm's dividend payments, such as the payout ratio and retention ratio. Given the definition of payout ratio as the proportion of earnings paid out as dividends to shareholders, DPS can be calculated by multiplying a firm's payout ratio by its earnings per share. A company's EPS, equal to net income divided by the number of outstanding shares, is often easily accessible via the firm's income statement. The retention ratio, meanwhile, refers to the opposite of the payout ratio, as it instead measures the proportion of a firm's earnings retained and therefore not paid out as dividends.

The idea that the intrinsic value of a stock can be estimated by its future dividends or the value of the cash flows the stock will generate in the future makes up the basis of the dividend discount model. The model typically takes into account the most recent DPS for its calculation.