divedents calculation

how to calculate the dividends for particular company

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The dividend per share is the amount you earn periodically for the investment that you made in a company by purchasing its share or stock. A publicly traded, or listed, business corporation earns profit through its business operations. The profit thus earned can either be used for reinvestment purposes or shared among its shareholders. If the company decides to distribute the earned profits, it declares a dividend. Generally, dividends are fixed per share. Hence, a shareholder will receive a dividend that is directly proportional to the number of shares he has of that particular corporation. Dividends are usually paid periodically (either quarterly or annually). These are declared periodically by the board of directors along with financial results.

Sample Calculation of DPS

Dividend per share calculation can best be explained with an example. Let us assume Amino Chemicals & Fertilizers, Inc., (ACFI) to be the corporation for which the dividend per share has to be calculated. We will assume the following figures for ACFI:

Total profit after tax (TPAT):$5.2 million

Retained profit (RP):$1.2 million

Number of outstanding shares (NOS):50 million

The dividend per share (DPS) is calculated with this formula: (TPAT - RP) / NOS.

Plugging the ACFI figures in, we get a DPS of 8 cents: (5.2 - 1.2) / 50 = 8 cents.