You can calculate dividend yield by annual dividend per share. And it divides by stock price. But this tells you what percentage company returns to shareholder in form of dividend. Therefore well known companies payout percent is high. And their dividend history is more regular. And also read Compare Average Dividend Yield by Sector. Hence, see below dividend yield formula.
Dividend Yield = Annual dividend per share / Stock’s price per share
How to calculate Dividend yield
For example, if a company’s annual dividend is Rs. 1.25 and stock trades at Rs. 24. So Dividend Yield is 5%. (Rs. 1.25 / Rs. 24 = 0.05). However, companies declare dividends in terms of % to face value of share.
For Example, Company trade at Rs. 55 with face value of Rs. 10 per share. And it declares 10% dividend. That means company will pay dividend of Rs. 1 per share to its share holders. Hence, in such case, Dividend Yield is 1% (Rs. 1 / Rs. 55 = 0.01)
Dividend yield is much more important than dividend amount
You need to understand difference between dividend amount and percentage. And it is important to understand dividend yield concept. Because, dividend yield is bond between dividend amount and price of company share. So it means that if company with share price of Rs. 900 announces dividend of Rs 10 per share. But company dividend yield is 1.11%. It derived as 10/900.
As an investor, you must look at dividend yield and not just dividend amount. But, dividend yield is current return. And it will receive in form of dividend. Check out Best Dividend Stocks List
Dividend reduces price of a company’s share
When company pays dividend its share price falls to some extent. And dividend paid on ex- date. Because, dividend paid in cash reduce share price. Hence, it is also important to note that dividend is money to shareholders. And companies pay it as part of its policy.
Dividend Payout Ratio = Dividend / Net Income
Dividends per share
You will get payment for each stock that you owned. And dividend is usually paid quarterly. But only portion of profits are distributed. Probably, left over profit stays with company as net income. Therefore ratio of earnings paid out to investors as dividend. To those who save earnings is called dividend payout ratio.
However, Dividend per share (DPS) is issued by company for every ordinary share. And Dividend per share is paid out by business including interim dividend.
Calculation of Dividends per Share
Dividend per share (DPS) is total dividends paid by business. And, it is also used in other financial formulas. Like dividend yield and dividend payout ratio. But, this formula is used by individuals.
Dividends per share = total dividends paid / total shares outstanding
Finally, see what is ex dividend date. And also record date vs ex dividend date. However, to know more details see difference between bonus shares, stock splits, rights issue and buybacks. Therefore check monthly dividend calendar.