Accounting: Step-by-Step Solutions to Find Dividends

by Mark Kennan

Dividends are payments made by a company to the shareholders to pass along its profits. In addition to calculating the dividends you will receive, you can also calculate other dividend metrics, including the dividend yield and the dividend payout ratio. The dividend yield measures the dividends as a percentage of the stock price and the dividend payout ratio measures how much of the company's earnings it transfers to shareholders through dividends. Knowing these figures helps you determine if you want to continue your investment in the company.

Divide the total dividend declared by the number of outstanding shares of common stock to find the dividends per share. For example, if a company announces it will pay a $625,000 dividend and it has 250,000 common shares outstanding, divide $625,000 by 250,000 shares to find the dividends per share equals $2.50 per share.

Multiply the dividends per share by the number of shares you own to calculate the dividends you will be paid. For this example, if you own 420 shares of the company, multiply 420 by $2.50 to find you will receive $1,050 in dividend payments.

Divide the dividend per share by the share value and multiply the result by 100 to find the dividend yield. For this example, if the share price is at $56 when it pays the $2.50 per share dividend, divide $2.50 by $56 to get 0.0446 and multiply by 100 to find the dividend yield equals 4.46 percent.

Divide the dividend per share by the earnings per share to find the dividend payout ratio. In this example, if the company had $4 in earnings per share, divide $2.50 by $4 to find the dividend payout ratio equals 0.625, or 62.5 percent.

Photo Credits

  • Stockbyte/Stockbyte/Getty Images