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    lyoakum1's Avatar
    lyoakum1 Posts: 3, Reputation: 1
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    #1

    Oct 1, 2009, 08:57 AM
    Calculating Dividends Per Share
    I am calculating ratios. I know for Dividend Yield Ratio the equation is:
    dividends per share/market price per share.
    The market price per share is $10 and the dividend yield is 2.5%.
    But I do not know what information is used to calculate the dividends per share.
    The info I do have is:
    Stockholder's Equity:
    Common Stock ($.50 Par) - $150,000
    Paid in Capital in Excess of Par - $600,000
    Retained Earnings - $239,000
    Exactly what information is taken from the Balance Sheet and Income Statement to calculate the DPS?
    Thank you!
    rehmanvohra's Avatar
    rehmanvohra Posts: 739, Reputation: 27
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    #2

    Oct 1, 2009, 09:16 AM
    Dividend per share is calculated as:

    Total amount of dividend declared divided by the number of shares in issue
    lyoakum1's Avatar
    lyoakum1 Posts: 3, Reputation: 1
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    #3

    Oct 1, 2009, 09:41 AM
    Now I'm even more confused. But that is no reflection on you. (smile)
    I know the total number of shares held are :300,000 is that the same as "number of shares in issue"?
    How is total amount of dividend declared calculated?
    ArcSine's Avatar
    ArcSine Posts: 969, Reputation: 106
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    #4

    Oct 1, 2009, 10:39 AM
    Yes, that's just another variant on saying "number of shares issued..", or "issued and outstanding" (as long as all the shares issued remain outstanding).

    But as to your question, you've noted that for Dividend Yield Ratio (DYR), Dividends Per Share (DPS), and Market Price per Share (MPS), the equation is...

    DYR = DPS / MPS

    This equation quickly becomes...

    DPS = DYR x MPS
    lyoakum1's Avatar
    lyoakum1 Posts: 3, Reputation: 1
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    #5

    Oct 1, 2009, 10:53 AM
    OK... so I can't get the DYR without the DPS and I can't get the DPS without the DYR?

    Would this be right?

    If I know:
    dividend yield is 2.5%
    Book Value $3.30
    Market Value: $10.00

    so... DYR would be: 2.5% X 3.30/10 = 8.25/10 = 0.825

    OMG! Please tell me I finally have it.
    ArcSine's Avatar
    ArcSine Posts: 969, Reputation: 106
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    #6

    Oct 1, 2009, 11:43 AM
    I was just drawing your attention to the fact that if you happen to know any two of the three variables (DYR, DPS, MPS), you can easily find the third.

    In your original question you stated that you already knew DYR (2.5%, or 0.025) and MPS ($10). Since you know those two, you can use them to find DPS:

    DPS = DYR x MPS

    Remember that Dividends Per Share simply answers the question, "How much dividend was paid to each share?" Since you've been given the Dividend Yield, and the Market Price, the answer is, "Each share received a dividend equal to 2.5% of its market price." And that is just the plain-English version of the equation above.

    I think you'll get it now :)
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