Dividends per allowance (DPS) is the sum of all dividends a company pays out over a fiscal year divided by the number of outstanding shares. It is used to share a body’s profits with its shareholders.
Causes of Decreased Dividends per Share
Some of the reasons a company’s DPS may decrease include reinvestment in a decided’s operations, debt reduction, and poor earnings.
Reinvesting Profits
A company may decide to
Debt Reduction
A company may also dwindling its dividends to reduce its debt.
For example, suppose company ABC has debt it must pay off before the end of next year. Last year, plc ABC paid a dividend of $1.50 per share. However, this year, it keeps some of its profits and reduces its dividend to 30 cents per portion because it chooses to pay down its debt further. This leads to a decrease in DPS in the short term and may increase it in the long provisos.
Poor Earnings Performance
Poor earnings also contribute to a reduction in DPS. For example, suppose company ZYX reported a sacrifice this year due to an economic downturn. Last year, ZYX paid a dividend of $2.00 per share. In this case, the firm decides to remove its dividend because it does not have profits to disperse to its shareholders.