Dividend Per Share. The Features and Benefits of DPS
The dividend per share means the amount of dividends paid by a company to its shareholders. It is calculated as follows: Dividends Per Share * Number Of Shares Outstanding At The End Of The Reporting Period.
This figure shows how much money you can make from investing in shares, compared with other investments such as bank accounts and bonds. Earnings yield x 100%.
This ratio compares the price at which an asset was sold against the sales made during that period. For example, if a company sells £100 worth of goods for £50 each then it has achieved a 50% profit margin on those goods. If the same company later increases prices so they sell their products for £60 each instead of £50 then this would be considered a rise in price. A higher percentage indicates a lower value.
Features of Dividend Per Share
A high dividend payout may indicate that a business is profitable or growing quickly. However, there are many factors involved when calculating a dividend payment including whether the company pays out all profits or retains some earnings for reinvestment purposes. Companies also have different methods of distributing dividends; some pay them directly into your account while others will send you a cheque. Some companies even offer special dividends where extra cash is given away to investors who own certain numbers of shares.
1. High Payout Percentage - This refers to the proportion of total income earned by the company being distributed to shareholders through dividends rather than retained within the firm. In general terms, the more a company distributes to shareholders via dividends, the better off they are financially.
2. Low Price-To-Book Value - P/BV measures the market's perception of the intrinsic value of a company relative to its current stock price. Generally speaking, the cheaper a company appears to trade based on its book values, the less likely it is to generate significant returns over time.
3. Higher Return On Equity - ROE represents the return generated by equity owners after deducting any costs associated with running the business. As a rule of thumb, the higher the ROE, the healthier the financial health of the company.
4. Lower Debt To Equity - DELETE reflects the level of debt incurred by a company divided by its shareholder base. Ideally, a low DELETE suggests that a company isn't overly reliant on borrowing to fund operations.
5. Strong Balance Sheet - BALANCE SHEET measures the overall strength of a company's finances. Essentially, it reveals how well equipped a company is to handle potential problems down the line.
6. Long History Of Growth And Profitability - HISTORY OF GROWTH AND PROFITABILITY provides insight into the past performance of a company. It helps identify trends in growth rates and profitability levels.
7. Steady Cash Flows - CASH FLOWS PER SHARE illustrates the average amount of cash flow generated by every share outstanding. The greater the number, the stronger the underlying fundamentals of the company.
8. Good Management Team - MANAGEMENT TEAM evaluates the quality of management teams within a company. An effective team should include people with strong leadership skills along with technical expertise.
9. Market Capitalization - MARKET CAPITALISATION shows the size of a company compared to other firms operating in similar industries. Larger markets tend to provide larger rewards for successful businesses.
10. Earnings Yield - EARNINGS YIELD gives an indication as to what kind of rate of return can be expected from investing in a particular security. Typically, the higher the yield, the better the investment opportunity.
11. Industry Sector - INDUSTRY SECTOR identifies the industry sector in which a company operates. Sectors often reflect broader economic conditions so understanding their movements can help predict future developments.
12. Dividends Per Year - DIVIDENDS PER YEAR indicates the annual dividend payments made by a company. A large figure usually means that the company has been able to sustainably increase its dividend payments year after year.
13. Annual Sales Volume - ANNUAL SALES VOLUME displays the yearly revenue produced by a company. This metric allows investors to gauge whether or not a firm will have sufficient funds available to meet growing demand.
14. Beta Coefficient - BETA COEFFICIENT measures risk versus reward when comparing two different investments. Companies with high beta coefficients are more volatile than those with lower numbers.
15. Current Ratio - CURRENT RATIO compares short term assets against long term liabilities. High ratios indicate healthy liquidity while poor ones suggest trouble ahead.
Benefits Of Dividend Per share
1. Income: If you invest your money at regular intervals then income becomes one of the most important things for you. You get paid regularly if you own shares in any stock market listed companies. So this is something very good for you.
2. Safety: When we talk about safety, there are many ways through which you can earn profits but only few methods give you both profit and safety like dividends. These days everyone wants to make some extra bucks without putting much effort.
3. Taxation: In case of capital gains tax, it is always beneficial because it reduces taxes on your earnings. But in case of dividends, they do not reduce taxes. They just pass them directly onto you. That’s why dividends are considered safe.
4. Liquidity: There are times when stocks go down heavily due to various reasons. At such situations, you need liquid asset to pay off debts. For example, let us say you owe $1000 to someone.
5. Growth: The growth of a business depends upon how well it manages its resources. It also depends upon the amount of cash flow generated by the company. As soon as the company starts generating enough cash, it pays out dividends to shareholders.
6. Portfolio diversification: By owning multiple stocks, you spread your risks across several sectors. Let's assume that you invested in 10 stocks. Now if 1-7 stocks goes up, 8-10 may go down. However, if all these stocks went down together, it would affect your portfolio negatively.
7. Financial stability: Stocks play an integral role in maintaining financial stability. Whenever there is a crisis, people tend to sell their holdings leading to fall in prices. On the other hand, whenever there is a boom, people start buying shares again resulting in rise in price. Thus, stocks act as a buffer during crises.
8. Investment opportunity: Investors who buy stocks want to see returns over time. Buying stocks gives you chance to grow your wealth over years rather than months.
9. Risk management: Since stocks involve higher volatility compared to bonds, investing in stocks helps you manage risk better.
10. Time value: One of the best benefits of holding stocks is that you enjoy the time value of money. Holding stocks makes sense even if interest rates remain low.
Cons of Dividend Per Share
Market fluctuations: Stock markets have been known to fluctuate wildly from day to day or week to week. This means that sometimes you will lose money and sometimes gain.
Taxes: Capital gains tax applies to investors who sell their stocks after holding them for less than 12 month. While dividend payments are exempt from taxation.
Management skills: A lot of work needs to be done before you actually reap rewards. Managing a large number of stocks requires skillful investment strategies.
High initial costs: To begin with, you must purchase stocks. Then you need to keep track of each share transaction. All this takes time and energy.
Low liquidity: Unlike mutual funds where you can redeem your investments anytime, stocks cannot be redeemed easily.
So, I hope now you know what exactly dividend per share means? Also, you should understand the pros and cons associated with it. Finally, you should decide whether you wish to hold stocks or not! For Instance , If you own Apple stock then you might get some extra income every year without doing anything. So, it is definitely worth considering.