**This is a post “in-progress.” Every day, a new formula will be added until it is completed.
Dividends are a simple concept. However, there are a lot of questions regarding their calculation.
This post attempts to answer most of those questions. If you’re wondering “how to calculate dividend _?”, the answer is probably here.
These answers are pretty straightforward, so little or no explanation is provided. Make sure you know your mathematics order of operations.
The different facets of dividend calculation are listed in alphabetical order.
Keep in mind that the same dividend calculation can have several different names.
Amount, amount per share, forward, annualized, annual, annual dividend per share
The dividend amount you see when looking at a stock quote.
Most recent dividend (per share) × annual frequency of dividends
Example:
$.22 dividend per share
4 payments (quarterly)
= $.22 × 4
= $.88
Amount from dividend yield, amount based on yield
Use the dividend yield to calculate the annual dividend per share
Current dividend yield × current stock price
Example:
0.59% dividend yield
$149.83 current stock price
= .0059 × 149.83
= $.88
Keep in mind that dividend yields aren’t as up-to-date as share prices.
After tax
How much of your dividends you get to keep after taxes.
Dividend amount (or yield) × (1 – marginal tax rate)
Example (dollars):
$.88 dividend amount
15% marginal tax rate
= .88 × (1 – .15)
= $.748
Example (yield):
.59% dividend yield
15% marginal tax rate
= .0059 × (1 – .15)
= .5015%
APY
The annualized yield realized after receiving dividends over a period of time.
(1 + (dividends received ÷ stock purchase price)) ^ (365 ÷ days held) – 1
Example:
$7.76 dividends received
$75.55 stock purchase price
773 days held (2 years, 43 days)
= (1 + (7.76 ÷ 75.55)) ^ (365 ÷ 773) – 1
= (1.10271 ^ .47219) – 1
= .0472, or 4.7%
Annual income, benefits
Amount of dollars in dividend income you received/can expect over the course of a year.
Annual dividends per share × number of shares
Example:
$.88 annual dividends per share
1,000 shares
= .88 × 1,000
= $880
Basis for reinvestment, Cost basis for dividend reivestment plan
The price at which dividends are reinvested via a DRIP.
Total dividend reinvested ÷ number of shares purchased
Example:
$17.53 total dividend amount
.917 number of shares purchased
= 17.53 ÷ .917
= $19.1182
(Yield) From balance sheet
Using the balance sheet and income statement to determine the total amount of dividends paid to shareholders.
This years’ net profit + last years’ retained earnings – this years’ retained earnings
(Dividend from balance sheet ÷ shares outstanding) ÷ share price
Example (dollars):
$1,343,000 this years’ net profit
$9,105,000 last years’ retained earnings
$6,896,000 this years’ retained earnings
= 1,343,000 + 9,105,000 – 6,896,000
= $3,552,000
Example (yield):
$3,552,000 dividend from balance sheet
871,000 shares outstanding
$213.19 share price
= 3,552,000 ÷ 871,000
= $4.08
= 4.08 ÷ 213.19
= 1.9%
Cover
The number of times a company could (theoretically) pay dividends to common stockholders with current earnings.
Earnings per share ÷ dividend per share
Example:
$7.36 earnings per share
$4.08 dividend per share
= 7.36 ÷ 4.08
= 1.80
