Earnings per Share & Dividend per Share

Earnings are profits in a business. Earnings can be definite at various levels. For instance, net profits are the profits available to the equity owners.

Earnings before Interest and Taxes (EBIT) are available to provide equity and debt holders.

Earnings before Depreciation Interest Taxes and Amortization (EBDITA) are the earnings available to a business to restore its assets over time and serve both equity and debt holders. Earnings of previous years are called historical earnings.

Trailing earnings refer to the earnings of the latest four quarters, intended on a rolling basis.

Forward earnings are the earnings computed based on future projections.

Earnings Per Share (EPS)

Net profits of the company go to the shareholders. Earnings per share are the net profit divided by the number of shares.

It specifies the amount of profit that company has earned for every share it has issued.

EPS Is Calculated As:

EPS Formula

EPS = Net Profit/ Number of shares outstanding

For a company with a Net Profit of Rs. 20 Lakh and outstanding shares of 4 Lakh, the EPS would be Rs. 5 (Rs. 20Lakh/ 4 Lakh).

A higher EPS depicts higher profitability and better earnings for the shareholders and will be chosen over shares of companies with lower EPS. EPS is a noteworthy variable in shaping a share's price.

What Is Dividend Per Share (DPS)?

The dividend is usually stated as a percentage of the face value of the shares—the part of the profit that the company gives out to its shareholders. For example, a 50% dividend declared by the company will translate into a dividend of Rs. 5 per share with a face value of Rs 10 (10*50% = 5). This is called Dividend per Share (DPS).