- What dividends per share measures
- Why dividends per share decreases
Dividends per share (DPS) is the dividend a company pays for each share outstanding. It decreases for one of two reasons: the company pays out less in total, or the same total is spread over more shares. Paying out less can come from the board's decision to keep earnings in the business, from too little cash or retained earnings, or from comparing against a period that included a one-time special dividend. More shares can come from a stock split or a stock dividend. This page explains each cause with textbook quotes and works through a sample. It explains the accounting and isn't investment advice.
Billed publishes this page.
What dividends per share measures
Investor.gov, a US Securities and Exchange Commission (SEC) website, defines a dividend as "A portion of a company's profit paid to shareholders." OpenStax Principles of Finance (chapter 11 key terms) defines it as "a sum of money paid regularly (typically quarterly) by a company to its shareholders out of its profits or reserves".
The per-share amount is what the board declares. OpenStax Principles of Accounting, Volume 1, section 14.3, gives the example "Assume that on December 16, La Cantina’s board of directors declares a $0.50 per share dividend on common stock." It adds: "Note that dividends are distributed or paid only to shares of stock that are outstanding." In that example, 9,200 outstanding shares × $0.50 = $4,600 in total.
Turned around, dividends per share = total dividends ÷ shares outstanding. That's why both numbers matter when DPS changes.
Why dividends per share decreases
1. The board declares a smaller dividend, or none
OpenStax, section 14.3: "A company’s board of directors has the power to formally vote to declare dividends." A dividend is a decision the board makes each time, so the board can declare less per share than last time, or nothing.
OpenStax also notes: "Most companies attempt dividend smoothing, the practice of paying dividends that are relatively equal period after period, even when earnings fluctuate." So a drop in earnings in one period doesn't necessarily show up as a lower dividend in that period.
2. Earnings are kept in the business
OpenStax, section 14.3: "Some companies choose not to pay dividends and instead reinvest all of their earnings back into the company." And: "In other instances, a business may want to use its earnings to purchase new assets or branch out into new areas." Earnings kept this way stay in retained earnings; see how retained earnings are calculated.
3. Not enough cash or retained earnings
OpenStax, section 14.3, sets out what a cash dividend needs:
"To pay a cash dividend, the corporation must meet two criteria. First, there must be sufficient cash on hand to fulfill the dividend payment. Second, the company must have sufficient retained earnings; that is, it must have enough residual assets to cover the dividend such that the Retained Earnings account does not become a negative (debit) amount upon declaration."
A loss lowers retained earnings, and cash spent elsewhere lowers the cash on hand. Either one can limit how much the company can pay. For how profit flows into equity, see what is net income and what is equity in business.
4. The last period included a special dividend
OpenStax, section 14.3: "In exceptional circumstances, some corporations pay a special dividend, which is a one-time extra distribution of corporate earnings." Its example: "While Costco’s regular quarterly dividend is $0.57 per share, the company issued a $7.00 per share cash dividend in 2017." Investor.gov: "Unscheduled dividend payments are known as special dividends or extra dividends."
If one year included a special dividend and the next didn't, dividends per share for the year falls even when the regular dividend stays the same.
5. More shares are outstanding
OpenStax Principles of Accounting, Volume 1 (chapter 14 key terms) defines a stock split as "issuance of new shares to existing shareholders in place of the old shares by increasing the number of shares and reducing the par value of each share" and a stock dividend as "dividend payment consisting of additional shares rather than cash".
Both raise the number of shares outstanding. Section 14.3 says of splits: "When a split occurs, the market value per share is reduced to balance the increase in the number of outstanding shares." The dividend works the same way: with more shares, the same total dividend comes to less per share. The sample below shows this.
Sample: a stock split and dividends per share
These are sample figures for a fictional small corporation.
- Year 1: 10,000 shares outstanding. The board declares $5,000 in dividends. Dividends per share = $5,000 ÷ 10,000 = $0.50.
- Year 2: a 2-for-1 split doubles the shares to 20,000. The board declares $6,000. Dividends per share = $6,000 ÷ 20,000 = $0.30.
Dividends per share fell from $0.50 to $0.30, yet the total paid rose by $1,000. A shareholder with 100 shares before the split holds 200 after it and receives 100 × $0.50 = $50 in year 1 and 200 × $0.30 = $60 in year 2. To compare across the split, put both years on the same share count: $0.30 × 2 = $0.60 per pre-split share, up from $0.50.
On the books, OpenStax says "Regardless of the type of dividend, the declaration always causes a decrease in the retained earnings account." If retained earnings were $40,000 before the year-2 declaration, they're $40,000 - $6,000 = $34,000 after it.
Reading a decrease
A lower dividends per share figure on its own doesn't tell you which cause is behind it. Check the share count for each period, whether an earlier period included a special dividend, and what the company said when it declared the dividend. This page isn't investment advice; for decisions about buying, holding or selling shares, talk to a licensed financial professional.
Where Billed fits
Billed's financial reporting page says: "See how profitable your business is with Income vs Expense report." If you run a small corporation, whether and how much to pay in dividends is the board's decision; ask your accountant about the accounting and tax side.
Quotes are from Investor.gov (dividend), OpenStax Principles of Finance (chapter 11 key terms), OpenStax Principles of Accounting, Volume 1 (section 14.3 and chapter 14 key terms) and billed.app, as published on October 30, 2026.
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Frequently Asked Questions
What is dividends per share?
It's the dividend a company pays for each share outstanding: total dividends divided by the number of shares outstanding. In an OpenStax example, a dividend of $0.50 a share on 9,200 outstanding shares comes to $4,600 in total.
Does a lower dividend per share mean the company paid out less?
Not necessarily. If the number of shares rises, for example after a stock split or a stock dividend, the same or a larger total can come to less per share. In the sample on this page, the total rises from $5,000 to $6,000 while dividends per share falls from $0.50 to $0.30.
Can a company stop paying dividends?
Yes. OpenStax notes that "Some companies choose not to pay dividends and instead reinvest all of their earnings back into the company," and that a cash dividend needs sufficient cash and sufficient retained earnings. Each dividend is declared by a vote of the board of directors.
What is a special dividend?
OpenStax describes it as "a one-time extra distribution of corporate earnings", and Investor.gov calls unscheduled dividend payments special dividends or extra dividends. A year that included one can make the next year's dividends per share look lower.
What is the difference between dividends per share and dividend yield?
Dividends per share is an amount per share. OpenStax defines dividend yield as "a financial ratio (dividend/price) that shows how much a company pays out in dividends each year relative to its stock price, expressed as a percentage".