What are the key dividend and earnings ratios?

SEARCHING
  1. Home
  2. Knowledge Base
  3. Financial Markets
  4. What are the key dividend and earnings ratios?
What are the key dividend and earnings ratios?

Dividends per share is used in other financial formulas, including dividend yield and the dividend payout ratioDividends per share (DPS) is the ratio of the total annual dividends a company pays out to common shareholders, including interim dividends, divided by the number of common shares issued and outstanding:

DPS = Common Stock Dividends/Number of Common Shares

Dividend yield (DYR) is the multiple that shows the dividend paid out to a company’s common shareholders as a percentage of the per share market price of the stock:

DYR = Common Stock Dividends/Share Price

The dividend payout ratio (DPR) is the amount of dividends paid out to common shareholders (dividends – preferred stock dividends) relative to a company’s total net income.  The formula to determine the percentage of net income (earnings) paid out to common shareholders or, conversely, retained by the company is:

DPR = Dividends/Net Income
or
DPR = 1 – Retention Ratio

If the dividend per share (DPS) and earnings per share (EPS) are known, the dividend payout ratio can alternatively be stated on a per share basis (DPS/EPS):

DPR = DPS/EPS

The enterprise value-to-EBITDA (EV/EBITDA) ratio compares the enterprise value of a company with its operating profit or EBITDA, where enterprise value (EV) is the total market value of all sources of a company’s financing (i.e., market value of equity + market value of preferred equity + market value of debt – cash and cash equivalents) and EBITDA is earnings before interest, taxes, depreciation, and amortization.  It is primarily used for capital intensive businesses where depreciation is significant and for high-debt companies to measure the company’s operating profitability before interest is paid out to its creditors.

The price/earnings-to-growth ratio (PEG) relates a stock’s price earnings ratio (PER) to the earnings growth ratio (EGR), which is the expected growth rate of the company’s earning per year:

PEG = PER/EGR


Was this knowledge point helpful?

2018-06-14T09:24:03+00:00

Leave a Comment

  Subscribe  
Notify of

Related Articles