How to Calculate Dividends Paid to Shareholders

by Ryan Menezes ; Updated April 19, 2017
Earnings per share rise with company profits.

Shareholders own stock in a company, which entitles them to a share in the firm's profits. The more shares investors own, the greater the dividends they will receive. Companies state the income that each individual share brings in terms of a stock's earnings per share (EPS). This value, which determines the dividends that shareholders receive, depends on the total income available to shareholders, and the number of outstanding shares.

Step 1

Subtract from the company's net income the value of the preferred dividends. This amount includes income owed to parties separate from the common shareholders. For example, if the company has a net income of $500,000 for the year and has promised a fixed annual dividend of $50,000 to preferred stockholders, then calculate $500,000 - $50,000 = $450,000.

Step 2

Divide the total earnings distributed to common shareholders by the number of outstanding shares. For example, if the company has issued 50,000 shares, then $450,000 ÷ 50,000 = $9. This is the earnings per share.

Step 3

Multiply the earnings per share by the number of shares that an investor owns. For example, if an investor owns 100 shares: $9 × 100 = $900. This is the value of the dividends that the company owes the investor.

About the Author

Ryan Menezes is a professional writer and blogger. He has a Bachelor of Science in journalism from Boston University and has written for the American Civil Liberties Union, the marketing firm InSegment and the project management service Assembla. He is also a member of Mensa and the American Parliamentary Debate Association.

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