Professional Documents
Culture Documents
Dilutive
Net income adjusted for interest Dilutive Options and
(net of tax) and preferred Warrants
dividends
Dilutive Contingent
Weighted average number of Issues
common shares assuming
maximum
Earnings Per Share-Complex Capital Structure
Illustration 16-17
Companies will not report diluted EPS if the securities in their capital
structure are antidilutive
DPS
• DPS is the earnings distributed to
ordinary shareholders divided by the
number of ordinary shares
outstanding
FORMULA OF DPS
• DPS=Earning paid to shareholders
(dividends)
Number of ordinary shares
outstanding
• DPS,the amount of dividend that a
stockholder
will receive for each share of
stockheld.It can be calculated by
taking the total amount of dividend
paid and dividing it by the total share
outstanding.
• If a company issue a $1 million
dividend and has 10
million share, the dividend pershare
ABOUT DPS
• Dividend per share does not usually need to be
calculated by investors as it is usually disclosed.
Careless readers may sometimes confuse the
final dividend with the total paid over the year.
• Dividends are paid to holders of shares on the
record date which will be announced
beforehand by the company. More important
from an investor's point of view is the
ex-dividend date on, and after, which shares
bought or sold on a stock exchange under
normal terms will be sold without the dividend
(so that the seller will get the dividend).
• Companies may pay interim dividends during
the year as well as a final dividend. These
should all be added together to get the total
Preferred Stock Included in
Capital Structure
• Basic EPS reflects only income
available to common stockholders; it
does not include preferred stock.
• Dividends on preferred stock should
be deducted from income before
extraordinary or other special items
from net income for EPS, if preferred
stock is in the capital structure.
Stability of dividend
• In India,companies announce
dividend as per cent of the paidup
capital per share. This can be
converted into DPS.
• When the company reaches new
level of earning & expects to
maintain them,the annual dividend
per share or dividend rate may be
increased.(prosperity)
Multiple Potentially Dilutive
Securities
• Remember that preferred
dividends were initially
subtracted from income to CAUTIO
arrive at income available to
common shareholders.
• When we assume
conversion of the preferred
stock, those dividends must
be added back.
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