Dividend per share
The dividend per share is the amount of profit made by a company divided by the number of shares.
Once a company has obtained benefits and decides to distribute them, depending on the type of share that the shareholder has (normal share, with advantages, with double dividend ...), it will receive the proportional part of the profit in relation to the part of the capital that it owns .
The dividend per share is a way of measuring the profitability that a company can give us, because if we take into account the dividend received between the value of the share at the time, we can determine what relative profit we have obtained.
For example, if a share is currently trading at 25 euros, and the company decides to pay out a dividend per share of 1.35 euros:
0.054 x 100: 5.40%
Calculating relatively, dividing the € 1.35 by the share's valuation (€ 25), we obtain that the direct return on our portfolio is 5.40%.
However, often not all stocks earn the same dividend. For example, as we have indicated above, sometimes the company differs between several types of shares, depending on the privilege, such as shares without voting rights, minority shareholders and other categories that try to make up for the lack of certain rights or privileges granting more money.
Another important part in the valuation of the dividend per share is the ideal moment to establish the distribution. Let's imagine that even though the stock is currently trading at € 25, we buy the shares at € 20 each. In this case, the direct real return would be 6.75% (the result of dividing 1.35 by 20 and not by 25), a ratio closer to reality, as it is the price at which we start the investment.
When the Board of Directors of a company decides whether or not to distribute the dividend, shareholders must assess whether the dividend is consistent with the risks of owning securities in that company or whether, on the contrary, it is subsequent sale is preferable once the benefit has been collected.