What is the dividend per share?

The dividend per share is the amount of profit that a company has achieved and that is divided by the number of shares. Therefore, when a company has obtained benefits and this part of the benefit decides to dedicate it to the dividends (part of the profit that is distributed among the partners), the shareholders will receive a proportional part of the profit. This proportional part of the profit will depend on the type of share you have (normal share, with advantages, double dividend, etc ...).

This concept is capable of measuring the profitability that a company is capable of giving us, since if we take the dividend received between the value of the share at the time we will be able to obtain the profit that, relatively, we have earned.

To visualize the concept, let's see an EXAMPLE: If a share is trading at € 30 and the company decides to distribute its dividend per share at € 2:

2 / 30 = 0,066

0,066 x 100 = 6,66%

The profitability it represents is 6% in the event that we want to have this share in our portfolio. Although, it should be noted that not all shares obtain the same dividend: as we indicated above, companies will differentiate in different types of actions, according to your convenience, your power within the company, the income of dividends, etc.

Another important aspect is to take into account the valuation of the dividend per share, since it will not be the same to value it at the share exit price (€ 30, following the previous example), than to acquire through changes at a lower price, changing the profit that we obtain.

Finally, it should be noted that the Board of Directors of a company must decide on the distribution or not of the dividend in a company, being the shareholders who decide whether the dividend is in accordance with the risks of owning the securities in that company or whether subsequent sale is preferable once said benefit has been collected.

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