1. What is the Dividends Per Share Formula?

The Dividends Per Share (DPS) formula calculates the amount of dividend distributed to common shareholders for each share they own. It represents the portion of a company's earnings paid out to shareholders.

2. How Does the Calculator Work?

The calculator uses the DPS formula:

Where:

• \( Net\ Income \) — Company's total earnings after all expenses and taxes
• \( Preferred\ Dividends \) — Dividends paid to preferred shareholders
• \( Common\ Shares \) — Total number of common shares outstanding

Explanation: The formula subtracts preferred dividends from net income to determine the amount available for common shareholders, then divides by the number of common shares to calculate per-share dividend.

3. Importance of DPS Calculation

Details: DPS is a key metric for investors evaluating a company's dividend policy and profitability. It helps assess the company's ability to generate cash returns for shareholders and indicates financial health and stability.

4. Using the Calculator

Tips: Enter net income and preferred dividends in dollars, common shares as a whole number. All values must be valid (net income ≥ 0, preferred dividends ≥ 0, common shares > 0).

5. Frequently Asked Questions (FAQ)

Q1: What is the difference between DPS and dividend yield?
A: DPS shows the actual dollar amount paid per share, while dividend yield expresses DPS as a percentage of the stock's current market price.

Q2: How often is DPS calculated?
A: DPS is typically calculated quarterly or annually, corresponding to a company's dividend payment schedule.

Q3: What factors can affect DPS?
A: Company profitability, cash flow, dividend policy, retained earnings needs, and economic conditions can all impact DPS.

Q4: Can DPS be negative?
A: No, DPS cannot be negative. If net income minus preferred dividends is negative, it means no dividends are paid to common shareholders.

Q5: Why subtract preferred dividends?
A: Preferred dividends are paid before common dividends and represent a fixed obligation that must be satisfied before common shareholders receive any distribution.