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DIVIDEND

- A share of earnings a company pays to its stockholders.


- A company provides preferred and common dividends. Preferred stockholders receive
dividends paid at a fixed rate that are more than the common dividend. Preferred stocks
resemble bonds and other debt instruments. A company is not required to pay
dividends. In order to pay dividends, a company must have sufficient cash and retained
earnings and must have approval from the board of directors.

DIVIDENT RATE
- It describes how much cash a company returns to investors.
- The dividend rate is simply the total amount of money you should receive from a stock
or other dividend-yielding asset over the course of a year. Dividend rate is very simple
math. Its not as popular for evaluating stocks as yield, which well cover here in a
second, but if youre already in a stock, dividend rate can give you a good idea of the
nominal amount you can expect to be paid in a given year.
- The amount of dividends per share a company pays to stockholders over a period of
time.
-
- If the board of directors of XYZ Company declares a quarterly dividend of 22 cents per
common share, the quarterly dividend rate is $.22. Some companies pay quarterly
dividends based on a stated annual dividend rate (in the example, the annual dividend
rate would be $.88). Whether stated or not, a dividend rate is often annualized to
present the most recent quarterly dividend on a full-year basis. For preferred stock, the
dividend rate is usually expressed as a percentage of par value. For example, preferred
shares with a $100 par value and a 6% dividend rate would pay dividends of $6 per
year. Dividend rate is also commonly used by financial institutions and investment
companies to describe income distributions. For a mutual fund, the dividend rate is the
most recent rate at which the fund distributes dividend and interest income. For a
credit union, the dividend rate is comparable to the interest rate paid on deposits at
banks.


DIVIDEND YIELD
- It describes the rate in terms of percentage.
- This measurement tells you what percentage return a company pays out to
shareholders in the form of dividends.
Dividend Yield = Dividend per share/Price per share
A stock that pays an annual dividend rate of $5 and is trading at $100 a share has a yield of 5
percent. An increase in the share price to $120 reduces the yield to about 4.1 percent.
Increasing the dividend rate to $6 returns the yield to 5 percent. That percentage has a very
important application its used as a proxy to measure return against competing assets,
particularly other dividend stocks and bonds.

DIVIDEND PAYOUT RATIO
- The ratio describes dividends paid as a percentage of total earnings. A higher ratio
means that a company uses its earnings to pay more in dividends rather than for
reinvestment. The ratio is a measure of whether a company can sustain its dividend
rate. Companies with high ratios and little cash flow usually are not able to sustain a
high rate and yield.

DPR = Dividends Per Share / Earnings Per Share

DIVIDEND PER SHARE
- The DPR measures what a company pays out to investors in the form of dividends.
- The sum of declared dividends for every ordinary share issued. Dividend per share
(DPS) is the total dividends paid out over an entire year (including interim dividends but
not including special dividends) divided by the number of outstanding ordinary shares
issued.

DPS can be calculated by using the following formula:
-
D - Sum of dividends over a period (usually 1 year)
SD - Special, one time dividends
S - Shares outstanding for the period

EARNINGS PER SHARE
- It represents the portion of a companys earnings, net of taxes and preferred stock
dividends, that is allocated to each share of common shares. The figure can be
calculated simply by dividing net income earned in a given reporting period (usually
quarterly or annually) by the total number of shares outstanding during the same term.
Because the number of shares outstanding can fluctuate, a weighted average is
typically used.
- To measure the companys profitability per unit of shareholder ownership

EPS = Net Earnings / Outstanding Shares
For example, companies A and B both earn $100, but company A has 10 shares outstanding,
while company B has 50 shares outstanding. Which companys stock do you want to own?
Using our example above, Company A had earnings of $100 and 10 shares outstanding, which
equals an EPS of 10 ($100 / 10 = 10). Company B had earnings of $100 and 50 shares
outstanding, which equals an EPS of 2 ($100 / 50 = 2).
So, you should go buy Company A with an EPS of 10, right? Maybe, but not just on the basis
of its EPS. The EPS is helpful in comparing one company to another, assuming they are in the
same industry, but it doesn t tell you whether it s a good stock to buy or what the market
thinks of it. For that information, we need to look at some ratios



What Is the Difference Between a Dividend Rate & Dividend Yield?
People buy stock to invest in a company. People can gain income from stocks that pay
dividends. When considering what stock to purchase, investors should look at the dividend rate
and the dividend yield. The dividend rate describes how much cash a company returns to
investors. The dividend yield describes the rate in terms of percentage. Both relate to the
dividend payout ratio.
Definition of a Dividend
A dividend is a share of earnings a company pays to stockholders. Stockholders have
ownership interests in a company, and a company usually pays dividends in cash on a
quarterly basis (a year has four quarters).
A company provides preferred and common dividends. Preferred stockholders receive dividends
paid at a fixed rate that are more than the common dividend. Preferred stocks resemble bonds
and other debt instruments. A company is not required to pay dividends. In order to pay
dividends, a company must have sufficient cash and retained earnings and must have approval
from the board of directors.
Definition of the Dividend Yield
The dividend yield is determined with this equation: dividend per share/price per share. The
yield is the percentage of a stock's market price a company returns in dividends. A stock that
pays an annual dividend rate of $5 and is trading at $100 a share has a yield of 5 percent. An
increase in the share price to $120 reduces the yield to about 4.1 percent. Increasing the
dividend rate to $6 returns the yield to 5 percent.
How the Dividend Yield and Rate Relate
The dividend yield and dividend rate are related to the dividend payout ratio. The ratio
describes dividends paid as a percentage of total earnings. It is calculated with the formula:
dividend per share/earnings per share. A higher ratio means that a company uses its earnings
to pay more in dividends rather than for reinvestment.
The ratio is a measure of whether a company can sustain its dividend rate. Companies with
high ratios and little cash flow usually are not able to sustain a high rate and yield. Frontier
Communications Corp. is an example of a company that had to cut its dividend rate because
the rate exceeded the cash flow
DEFINITION of 'Dividend Per Share - DPS'
The the sum of declared dividends for every ordinary share issued. Dividend per share (DPS) is
the total dividends paid out over an entire year (including interim dividends but not including
special dividends) divided by the number of outstanding ordinary shares issued.

DPS can be calculated by using the following formula:


D - Sum of dividends over a period (usually 1 year)
SD - Special, one time dividends
S - Shares outstanding for the period