Study Notes

Dividend per Share

Level:
AS, A-Level
Board:
AQA, Edexcel, OCR, IB

Last updated 22 Mar 2021

Dividend per share is an important and widely-used shareholder ratio.

A key focus of shareholders is their return on investment. The returns from investing in shares of a company come in two main forms:

  • The payment of dividends out of profits
  • The increase in the value of the shares (share price) compared with the price that the shareholder originally paid for the shares

One very straightforward shareholder ratio (though as we shall see – not a hugely helpful one) is dividend per share. This shows the value of the total dividend per issued share for the financial year.

Quoted public companies usually split the annual dividend into two payments – the "interim" (paid after six months trading) and the "final" (paid at the end of the financial year). In these cases, it is necessary to add the two dividend payments together.

Dividend per share formula and example

A key problem with dividend per share is that the ratio lacks a sensible context. We don't know:

  • How much the shareholder paid for the shares – i.e. what the dividend means in terms of a return on investment
  • How much profit per share was earned which might have been distributed as a dividend

© 2002-2022 Tutor2u Limited. Company Reg no: 04489574. VAT reg no 816865400.