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Step 7 of 11

How to look at what shareholders get

Dividends, buybacks and the number of shares: what happens to the owners' slice.

Click any word with a dotted underline to see what it means.

Shareholders benefit in two ways: from cash the company returns to them, and from their slice of the company growing in value. This step looks at how the company shares its money with its owners, and whether each share is becoming a bigger or smaller piece of the business.

What to look at

  • and the : does the company pay, how much, and has it been steady?
  • : is the company buying back its own shares?
  • The number of shares over the years: if it keeps rising, each share is a smaller piece of the company. This is called dilution, and it often comes from shares given to employees or sold to raise money.
  • The : how much of the profit goes out as dividends.

Questions to ask yourself

  • Is the company paying out more than its , and using debt or savings to do it?
  • Are buybacks shrinking the number of shares, or only making up for new shares given to employees?
  • What else could the company do with this cash, such as paying down debt or investing in growth, and how does it explain its choice?

Keep in mind

Paying dividends isn't a sign of quality, and not paying them isn't a warning sign. Young companies often reinvest everything, while mature ones often return more. What matters is whether the payments fit the cash the business actually produces.

On StockLab

The dividend yield and the amount paid per share over the last 12 months are in the Simple View. For the basics, read Dividends and buybacks.