How to Calculate Dividends

Thứ bảy - 27/04/2024 01:08
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.")...
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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] 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]

Dividends Calculator

Dividends Calculator
Method 1
Method 1 of 2:

Finding Total Dividends from DPS

  1. Step 1 Determine how many shares of stock you hold.
    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.
  2. 5
    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.
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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]

Method 2
Method 2 of 2:

Finding Dividend Yield

  1. 1
    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.
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To get started, you'll need to find the current price per share of the stock you're analyzing.

Calculate Dividends Step 6
  1. 1
    • 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]
    • 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.
  2. Step 4 Use dividend yields to compare investment opportunities.
    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.
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  • 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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