What is the dividend per share ratio?
The term dividends per share (DPS) refers to the total dividend a company pays out over a 12-month period, divided by the total number of outstanding shares.
Healthy. A range of 35% to 55% is considered healthy and appropriate from a dividend investor's point of view. A company that is likely to distribute roughly half of its earnings as dividends means that the company is well established and a leader in its industry.
Dividend Per Share (DPS) is the total amount of dividends attributed to each individual share of a company's outstanding stock. Calculating the dividend per share allows an investor to assess how much money he or she will receive from the company on a per-share basis.
Say a company earns $100 million this year and makes $50 million in dividend payments to its shareholders. In this case, its dividend payout ratio would be 50%. You can also use per-share amounts to get the same result. This can be simpler since companies report dividends and earnings in per-share amounts.
Yields from 2% to 6% are generally considered to be a good dividend yield, but there are plenty of factors to consider when deciding if a stock's yield makes it a good investment. Your own investment goals should also play a big role in deciding what a good dividend yield is for you.
So, what counts as a “good” dividend payout ratio? Generally speaking, a dividend payout ratio of 30-50% is considered healthy, while anything over 50% could be unsustainable.
Generally speaking, a DCR of 2 is viewed as good, as this indicates that a company has the capacity to pay its dividends twice over. A DCR of below 1.5 is viewed as a possible concern, signalling the use of loans.
Financial Health Indicator: The dividend payout ratio can be a good indicator of a company's financial health. A consistently high payout ratio may indicate that the company is financially stable and generating healthy profits, while a consistently low payout ratio may indicate financial weakness.
Still, as a general rule of thumb, most companies aim for an equity ratio of around 50%. Companies with ratios ranging around 50% to 80% tend to be considered “conservative”, while those with ratios between 20% and 40% are considered “leveraged”.
Many stock brokerages offer their customers screening tools that help them find information on dividend-paying stocks. Investors can also find dividend information on the Security and Exchange Commission's website, through specialty providers, and through the stock exchanges themselves.
What is a good earnings per share?
There's no definition of a “good” or “bad” EPS value. But all other things being equal, the higher a company's EPS is, the better. The opposite is true for a company's price-to-earnings (P/E) ratio. In most cases, the lower a company's P/E ratio is, the better.
Dividend Per Share (DPS) is the total amount of dividends attributed to each individual share outstanding of a company. Calculating the dividend per share allows an investor to determine how much income from the company he or she will receive on a per-share basis.
Interpretation of Dividend Payout Ratio
The two sources of return are related as follows: A high DPR means that the company is reinvesting less money back into its business, while paying out relatively more of its earnings in the form of dividends.
Understanding the Dividend Payout Ratio. The dividend payout ratio is 0% for companies that do not pay dividends and 100% for companies that pay out their entire net income as dividends. Several considerations go into interpreting the dividend payout ratio—most importantly the company's level of maturity.
Check These Out, Too. Investing in dividend stocks can be as much about safety as it is about income. A generous dividend yield might look attractive but it needs to be sustainable.
Living off dividends is a financial strategy that appeals to those aiming for a reliable income stream without tapping into their investment principal. This approach has intrigued many investors, from early-career individuals to those nearing retirement.
Dividends can be classified either as ordinary or qualified. Whereas ordinary dividends are taxable as ordinary income, qualified dividends that meet certain requirements are taxed at lower capital gain rates.
A low dividend payout ratio is considered preferable to a high dividend ratio because the latter may indicate that a company could struggle to maintain dividend payouts over the long term.
Dividend Data
Apple Inc.'s ( AAPL ) dividend yield is 0.52%, which means that for every $100 invested in the company's stock, investors would receive $0.52 in dividends per year. Apple Inc.'s payout ratio is 15.08% which means that 15.08% of the company's earnings are paid out as dividends.
Typically, a REIT with a payout ratio between 35% and 60% is considered ideal and safe from dividend cuts, while ratios between 60% and 75% are moderately safe, and payout ratios above 75% are considered unsafe. As a payout ratio approaches 100% of earnings, it generally portends a high risk for a dividend cut.
What is the ideal dividend per share?
Yields from 2% to 6% are generally considered to be a good dividend yield, but there are plenty of factors to consider when deciding if a stock's yield makes it a good investment. Your own investment goals should also play a big role in deciding what a good dividend yield is for you.
What Is the Preferred Dividend Coverage Ratio? The preferred dividend coverage ratio is a measure of a company's ability to pay the required amount that will be due to the owners of its preferred stock shares. Preferred stock shares come with a dividend that is set in advance and cannot be changed.
The average dividend yield on S&P 500 index companies that pay a dividend historically fluctuates somewhere between 2% and 5%, depending on market conditions. 7 In general, it pays to do your homework on stocks yielding more than 8% to find out what is truly going on with the company.
As a rule of thumb, dividend yields of between 2% and 5% are considered strong, and anything above this can be a good buy but may also come with risks attached.
Typically, the average P/E ratio is around 20 to 25. Anything below that would be considered a good price-to-earnings ratio, whereas anything above that would be a worse P/E ratio. But it doesn't stop there, as different industries can have different average P/E ratios.
