Do Dividends Per Share Mean Anything?

[marko]

Another slow day at the marko household.

Musing: Obviously, one measures dividends per the amount of dollars in that particular stock/fund. Stock X pays 4.5% of dollars invested for example.

Yes, payments are made on a per share basis, but I'm getting a migraine wondering if dividends per share show any indication of comparative value. Again, "numbers is hard" for me.

Example:
MF #1 pays 6% dividend but that translates to $0.35 per share. 12,000 shares @ $6 per share

MF#2 pays 2% dividend but that translates to $1.71 per share. 3,000 shares @ $30 per share

On a percentage basis, MF#1 is the better deal, but on a per share basis, MF#2 is the winner.

Is any of this meaningful? Or have I just gone down the rabbit hole again?

 

[Cortina]

Another slow day at the marko household.

Musing: Obviously, one measures dividends per the amount of dollars in that particular stock/fund. Stock X pays 4.5% of dollars invested for example.

Yes, payments are made on a per share basis, but I'm getting a migraine wondering if dividends per share show any indication of comparative value. Again, "numbers is hard" for me.

Example:
MF #1 pays 6% dividend but that translates to $0.35 per share. 12,000 shares @ $6 per share

MF#2 pays 2% dividend but that translates to $1.71 per share. 3,000 shares @ $30 per share

On a percentage basis, MF#1 is the better deal, but on a per share basis, MF#2 is the winner.

Is any of this meaningful? Or have I just gone down the rabbit hole again?

How are the other Rabbits ?
It's a bit like comparing share prices of one company to share prices of another .............. apples and bananas (they cannot be compared !) Forget about how the return is made up as such ... compare the returns. Not how best to put all this , but you are over thinking it I think !

 

[qwerty3656]

No it doesn't matter. Think of a company as a pie. You can cut the pie up into a bunch of little pieces or fewer larger pieces and the pies can be of different sizes. The return on the $'s you invest is what matters.

Also, fyi, the example you gave is not apples to apples because you have $72,000 invested in #1 and $90,000 invested in #2 (and your % are not calculated correctly)

 

[Dash man]

I like to compare the growth rate of the dividend year over year to compare dividends, along with the payout ratio.

 

[target2019]

The Rabbit Wins!!!
https://youtu.be/Zc0oainzuaI

 

[Taco]

The per share number doesn't matter. Two $5 bills equals one $10 bill. Having two bills vs one bill doesn't change that both are worth a total of $10.

Translating to your example:

$10,000 invested in MF #1 would produce $X in dividends
$10,000 invested in MF #2 would produce $Y in dividends.

The number of shares purchased by the $10,000 in those 2 cases does not matter - they are both worth $10,000.
The MF with the higher yield would of course produce more dividends.

 

[scrabbler1]

Marko, may I suggest another ratio? I use this for my own calculations such as a yield for my various bond funds which pay monthly dividends.

I divide the dividends per share by the cost of each share. In my case, I use the average cost basis per share, which is, on average , what I paid for each share in my bond fund.

For your two stocks, assuming the $ per share is your actual cost basis per share,

MF #1 would be $0.35 / $6, or 5.83%.

MF #2 would be #1.71 / $30, or 5.70%.

MF #1 is very slightly better, IMHO, but they are nearly the same by my metric.

 

[marko]

Thanks all! I suspected as much but was curious if there was some correlation that I might be missing.

 

[Phroig]

Dividend per share (like EPS) is not meaningful per se, but it allows you to conveniently figure out, firstly, the amount of dividends you will receive (DPS*#shares you own), and secondly, the dividend yield, since equity values are readily available on a per share basis.