The dividend per share (DPS) is a simple formula that takes the total dividend payment and divides it by the total number of outstanding shares. The shares are good for dividend payments and made to shareholders of record on a certain date. The more shares that are outstanding, the less dividend per share can be captured.
This type of dividend is usually payable on a quarterly basis, but there is never a guarantee of a dividend. These payments are not made out of debt obligations, but because shareholders have partial ownership in the company and, as such, are entitled to a share of the profits. If there is an unprofitable year or quarter, a company may not have a dividend to issue.
The dividend per share is usually declared every quarter at a meeting of the board of directors or shareholders. Most of the time, after the meeting, it is made a matter of public record and could spur an increase in the stock’s value, especially in the short term. In nearly all cases, the dividend is calculated by the company so that shareholders will know exactly what is being paid and when it will be paid.
Dividends are very important to some shareholders, as this is one of the primary ways of making money in the stock market. In fact, some investors may buy a stock and hold onto it for a relatively short period of time just to take advantage of this payment. These dividends can be very valuable, especially to those who purchase a substantial number of shares.
It is important to note that a dividend per share is often considered a cumulative, annual payment, even though it is paid quarterly. For example, if $1 US Dollar (USD) is paid every quarter, the annual dividend per share would be $4 USD. However, the company may not say that this is an annual figure. Therefore, if the investor is doing his or her research, he or she should carefully note exactly what the company is defining.
Often, this number is a measure of a company’s performance, simply because it indicates how profitable a company is over a quarter or year. Companies often compare the performance in each quarter to what it did in the same quarter the last year. This may also include a comparison of the dividend per share from the previous year.