How to Calculate Dividend

Dividend per share is calculated using a simple method. To calculate DPS, divide the total number of dividends paid by the company by the total number of shares held. The annual dividend is the total dividends given out during the year.

In this article, we will discuss how to calculate dividends along with the basic information of the dividend. We will also discuss the dividend formula and provide some examples of how to calculate dividends. Let’s start our learning on “How to Calculate Dividend.”

What is Dividend Ratio?

Dividend ratio is the ratio between the number of dividends paid and the net income of the organization. In other words, the dividend ratio is the total amount of dividends that an organization pays to shareholders relative to its net income.

The dividend declared by a company depends upon various factors that are shown in the image below:

What is Dividend Yield?

Dividend yield is given by the ratio of the annual dividend per share to the current share price. In other words, dividend yield is the financial ratio which gives information about the dividends paid by the company each year relative to its share price.

Formula and Calculation of Dividend Payout Ratio

The formula of dividend payout ratio is given by:

Dividend Payout Ratio = Dividends Paid / Net Income

To calculate the dividend payout ratio, we divide the net income’s total number of dividends paid.

Formula and Calculation of Dividend Yield

The formula of dividend yield is given by:

Dividend Yield = Annual Dividend per share / Current Share Price

To calculate the dividend yield, we divide the annual dividend per share by current share price.

Dividend Per Share (DPS) = Total number of dividends paid / total numbers of shares held

Annual DPS = Sum of all dividends given during the year

What is Difference Between the Dividend Payout Ratio and Dividend Yield?

The below table gives the difference between the dividend payout ratio and dividend yield.

Characteristics	Dividend Payout Ratio	Dividend Yield
Definition	Dividend payout ratio is the ratio of dividend paid by the net income.	Dividend yield is the ratio of annual dividend per share by the current price of share.
Formula	Dividend Payout Ratio = Dividends Paid / Net Income	Dividend yield = Annual Dividend per share / Current Share Price
Comparison	It compares the dividends paid by the organization with the net income.	It compares the annual DPS of the organization with the market price of the share.

Examples of Dividend Ratio and Dividend Yield

Example 1: Given the dividends paid by an organization is 50000 and the net income is 100000 then, find the dividend payout ratio.

Solution:

Dividend payout ratio is given by:

Dividend Payout Ratio = Dividends Paid / Net Income

Dividend Payout Ratio = 50000 /100000

Dividend Payout Ratio = 0.5

Example 2: If the annual dividend per share is 100000 and the current share price is 20000 then, find the dividend yield ratio.

Solution:

Dividend yield is given by the formula:

Dividend Yield = Annual Dividend Per Share / Current Share Price

Dividend Yield = 100000 / 20000

Dividend Yield = 5

FAQs on Dividend Yield

What is the formula for calculating dividends?

Formula for calculating how much money a company is paying out in dividends is simple: Subtract the net retained earnings from the annual net income.

How do you calculate 10% dividend?

Formula for calculating the dividend yield is equal to the dividend per share (DPS) divided by the current share price. For example, if a company trading at Rupees 1000.00 in the market, issues annual dividend per share (DPS) of Rupees 100.00, the company’s dividend yield is equal to 10%.

How are monthly dividends calculated?

Dividend income is calculated by multiplying the dividend yield of the stock par value and then multiply that amount by the number of shares that you own.

What is Dividend Per Share?

Dividend per share is obtained by the ratio of the total number of dividends to the total number of shares.

How to Calculate Dividend Yield?

Dividend yield is calculated using the formula:

Dividend yield = Annual Dividend per share / Current Share Price

What is the Formula of Dividend Payout Ratio?

Formula for the dividend payout ratio is given by:

Dividend Payout Ratio = Dividends Paid / Net Income