Historical Background to the DPS (Dividend Per Share) Calculation
The Dividend Per Share calculation (DPS calculation) has historically been quoted and used by most industry investors as a quick and simple indicator of the cash return that an investor may expect. The DPS calculation is also widely quoted in the media, but can easily be misunderstood.
What is the DPS Calculation Definition?
In simple terms, the DPS calculation is calculated for a quoted company as:-
- “Dividend Per Share (DPS)” = “Dividends announced during the period / Number of Shares in issue”
What Does the Dividend Per Share (DPS) Calculation Mean to Industry and the Investor?
On its own the Dividend Per Share calculation holds little value. This is because it is critical to understand the capital value of the stocks to ensure that the investor is comparing “apples with apples”. For a possibly more meaningful analysis investors use the Dividend Yield Ratio.
What are the Key Problems with DPS Calculation Analysis of a Company (or an Industry)?
The possible key problems with the DPS calculation is that investors & industry cannot analyse the dividend payout without a comparison with the stock value of the share.