Dividend Per Share, Dividend Yield and Dividend Cover
Dividend Per Share
The dividend per share is the total dividend amount to be paid out by the company
divided by the number of ordinary shares in issue. The total amount to be paid will either
be the sum of the interim and final dividend or, if the company pays
quarterly dividends, the sum of each quarter's dividend amount.
The dividend yield for a company is the dividend per share divided by the share price. For example,
if the dividend per share was 4p and the share price 100p the yield would be (4p / 100p) * 100 = 4%.
This means on a £1000 investment you would receive a dividend worth 1000 * 0.04 = £40 (but remember
you would lose at least 10% of this as tax).
On the main page, we quote two different dividend yield figures for a company: the historical
and projected yield, both of which are based on a year's worth of dividend payments. The historical
figures are what has last been announced and the projected figures are what is anticipated
will be announced.
The dividend cover tells you how many times the dividend could be paid out of current profits
after tax. In this way, it illustrates the affordability of the current dividend and can be used
to gauge whether the current level of payout can be sustained. Dividend cover is calculated
as the earnings per share divided by dividend per share. It needs to be considered within
the context of the company. For example, with a growth company you should see the dividend
being covered several times but with a non-growth company it being close to one may be acceptable.