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How to Calculate Percentage Return From Dividends Paid Per Share

Original post by Mark Kennan of Demand Media

Some investors make money through dividends paid by companies.

When you purchase stocks as an investment, you can make money either through the stock price rising and then selling the stocks, or by the company paying out some of its earnings in the form of a dividend to shareholders. Often, investors make money through both. However, you can calculate the percentage return on an investment just based on the dividends the company pays each year. To do so, you need to know the dividend payments the company made and the purchase price of the stock.

Step 1

Add up all the dividend payments per year to find the total annual dividends for the stock. For example, if the company made four quarterly dividend payments of $1.30, multiply $1.30 by four to get an annual dividend of $5.20 per share.

Step 2

Divide the annual dividends paid by the price of the stock. For this example, if the stock cost you $87, divide $5.20 by $87 to find the return expressed as a decimal equals 0.05977.

Step 3

Multiply the return expressed as a decimal by 100 to find the percentage return based on the dividends per share. Completing this example, multiply 0.05977 by 100 to find the percentage return for the year based on the dividends paid per share, which is 5.977 percent, which rounds up to 6 percent.

                   

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About the Author

Mark Kennan is a freelance writer specializing in finance-related articles. He has worked as a sports editor for "Ring-Tum Phi" and published articles on a number of online outlets. Kennan holds a Bachelor of Arts in history and politics from Washington and Lee University.

Photo Credits

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