What is Dividend per Share?

Dividend per share is a measure of the dividend payout per share of a company’s common stock . The measure is used to estimate the amount of dividends that an income investor might expect to receive if he or she were to buy a company's common stock. The measure is especially effective when tracked on a trend line , since a consistent amount per share indicates management's willingness to make consistent payouts to investors. In addition, an increasing trend of dividends paid indicates management’s belief that the business has sufficiently robust cash flow to support dividend payments.

This measure is not commonly used by growth investors, who are more concerned with the intentions of management to plow funds back into operations, thereby increasing the value of the company and the price per share. If anything, these investors prefer not to invest in a business that issues dividends at all.

How to Calculate Dividend per Share

To calculate dividend per share, add together the sum of all periodic and special dividends in a year, and then divide by the weighted average number of common shares that were outstanding during the same period. The dividend per share formula is as follows:

(Sum of all periodic dividends in a year + Sum of all special dividends in a year) ÷ Weighted average number of common shares outstanding during the year

An argument can be made that special dividends should be excluded from the aggregation of dividends paid per year, if the intent is to project what the dividend per share will be in a future period. This is because there is no assurance that these special dividends will be issued again.

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