How to Calculate Dividends

Thứ bảy - 27/04/2024 01:08

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When a company makes money, it usually has two general options. On one hand, it can reinvest this money in the company by expanding its own operations, buying new equipment, and so on. (Money spent this way is called "retained earnings.") Alternatively, it can use its profits to pay its investors. Money paid to investors in this way is called a "dividend".^{[1] X Research source} Calculating the dividend that a shareholder is owed by a company is generally fairly easy; simply multiply the dividend paid per share (or "DPS") by the number of shares you own. It's also possible to determine the "dividend yield" (the percentage of your investment that your stock holdings will pay you in dividends) by dividing the DPS by the price per share.^{[2] X Research source}

Dividends Calculator

Dividends Calculator

Method 1

Method 1 of 2:

Finding Total Dividends from DPS

If you're not already aware of how many shares of company stock you own, find out. You can usually get this information by contacting your broker or investment agency or checking the regular statements that are usually sent to a company's investors via mail or email.

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Find your company's dividends per share (or "DPS") value. This represents the amount of dividend money that investors are awarded for each share of company stock they own.^{[3] X Research source} For a given time period, DPS can be calculated using the formula DPS = (D - SD)/S where D = the amount of money paid in regular dividends, SD = the amount paid in special, one-time dividends, and S = the total number of shares of company stock owned by investors. ^{[4] X Research source}

For this calculation, you can usually find D and SD on a company's cash flow statement and S on its balance sheet.

Note that a company's dividend-payout rate can change over time. Thus, if you're using past dividend values to estimate what you'll be paid in the future, there's a chance that your calculation may not be accurate.

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When you know the number of shares of company stock you own and the company's DPS for the most recent recent time period, finding the approximate amount of dividends you will earn is easy. Simply use the formula D = DPS multiplied by S, where D = your dividends and S = the number of shares you own. Remember that since you're using the company's past DPS value, your estimate for future dividend payments may end up differing somewhat from the actual number.^{[5] X Research source}
For example, let's say that you own 1,000 shares of stock in a company that paid $0.75 per share in dividends last year. Plugging the appropriate values into the formula above, we get D = 0.75 multiplied by 1,000 = $750. In other words, if the company pays about the same amount of dividends this year as it did last year, you'll make about $750.

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If you're calculating the dividends for many different stock holdings, or if you're dealing with large numbers, the basic multiplication required to find the dividends you're owed can be laborious. In this case, using a calculator can be much easier. You may want to use the free calculator provided at the top of the article, or one of many online dividend calculators which offer sophisticated options for calculating your dividends.
Other types of calculators can be useful for accomplishing similar investment calculations. For instance, this calculator works backwards, finding DPS from the company's total dividends and your number of shares.

Don’t forget to account for dividend reinvestment. The process above is designed to work for relatively simple cases where the number of stocks owned is a fixed quantity. However, in real life, investors often use the dividends they earn to buy more shares of stock in a process called "dividend reinvestment." By doing this, an investor sacrifices a short-term dividend payout in favor of the long-term gains that can result from owning added shares.

If you've arranged for a dividend-reinvestment program as part of your investment, keep an updated tally of shares you own so that your calculations will be accurate.^{[6] X Research source}

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- For instance, let’s say you earn $100 per year in dividends from one of your investments and that you arrange to have this money reinvested into additional shares every year. If the stock trades at $10 per share and has a DPS of $1 annually, spending your $100 will get you ten more shares and another $10 in additional dividends per year, bringing your dividends to $110 in the next year. Assuming the stock’s price remains the same, you’ll be able to buy eleven more shares the following year, then about twelve the year after that. This "compounding" effect will continue as long as you let it, assuming the stock price remains stable or rises. This focus on dividends as an investment strategy has made some people rather wealthy, although, alas, there are no guarantees of spectacular results.

Method 2

Method 2 of 2:

Finding Dividend Yield

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Determine the share price of the stock you’re analyzing. Sometimes when investors say that they want to calculate the "dividend" on their stocks, what they're actually referring to is the "dividend yield." The dividend yield is the percentage of your investment that a stock will pay you back in the form of dividends. Dividend yield can be thought of as an "interest rate" on a stock.

To get started, you'll need to find the current price per share of the stock you're analyzing.

For publicly-traded companies (Apple, for instance), you can find the latest stock price by checking the website of any major stock index (e.g., NASDAQ or S&P 500)^{[7] X Research source}
Keep in mind that the share price of a company's stock can fluctuate based on the company's performance. Thus, estimations for the dividend yield of a company's stock can be inaccurate if the stock's price suddenly moves significantly.

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Find the most recent DPS value of the stock you own. Again, the formula is DPS = (D - SD)/S where D = the amount of money paid in regular dividends, SD = the amount paid in special, one-time dividends, and S = the total number of shares of company stock owned by all investors.^{[8] X Research source}
As noted above, you can typically find D and SD on a company's cash flow statement and S on its balance sheet. As an additional reminder, a company's DPS can fluctuate with time, so you'll want to use a recent time period for the most accurate results.

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Finally, divide your DPS value by the price per share for the stock you own to find your dividend yield (or, in other words, use the formula DY = DPS/SP). This simple ratio compares the amount of money you are paid in dividends to the amount of money you had to pay for the stock to begin with. The greater the dividend yield, the more money you'll earn on your initial investment.^{[9] X Research source}
For example, let's say that you own 50 shares of company stock and that you bought these shares at a price of $20 per share. If the company's DPS in recent time periods has been roughly $1, you can find the dividend yield by plugging your values into the formula DY = DPS/SP; thus, DY = 1/20 = 0.05 or 5%. In other words, you'll make 5% of your investment back in each round of dividends, no matter how much or how little you invest.

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Investors often use dividend yields to determine whether to make certain investments or not. Different yields appeal to different investors. For instance, an investor who's looking for a steady, regular source of income might invest in a company with a high dividend yield. These are typically successful, established companies. On the other hand, an investor who's willing to take a risk for the chance of a major payout might invest in a young company with lots of growth potential. Such companies often keep most of their profits as retained earnings and won't pay out much in the form of dividends until they are more established. Thus, knowing the dividend yields of the companies you're thinking of investing in can help you make smart, informed investment decisions.
For instance, let’s say that two competing companies both offer dividend payments of $2 per share. While they may at first seem to be equally good investment opportunities, if one company’s stock is trading at $20 per share and the other’s is trading at $100 per share, the company with the $20 share price is the better deal (all other factors being equal). Every share of the $20 company will earn you 2/20 or 10% of your initial investment per year, while every share of the $100 company will earn you just 2/100 or 2% of your initial investment.

Warnings

Not all stocks or funds pay dividends. Some are primarily growth stocks or growth funds. In such cases investment earnings will come from share price appreciation when you sell. In some cases struggling companies may reinvest profits into the company rather than paying them to shareholders.

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Calculating dividend yields involves the assumption that dividends will remain constant. An assumption is not a guarantee.

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