Question

1. For JPMorgan stock- what is the ROE, what is the dividend in Dollars per Share? How frequently does it pay? What is the Earnings per share? (we are not going all the way and computing a valuation, but to start understanding how you get the actual numbers

ROE?

Dividend per share?

Frequency of dividend payment?

EPS?

Answer 1

A

Return on equity (ROE) is a measure of financial performance calculated by dividing net income by shareholders' equity. Because shareholders' equity is equal to a company’s assets minus its debt, ROE is considered the return on net assets. ROE is considered a measure of how effectively management is using a company’s assets to create profits. on Equity Formula

The following is the ROE equation:

ROE = Net Income / Shareholders’ Equity

ROE provides a simple metric for evaluating investment returns. By comparing a company’s ROE to the industry’s average, something may be pinpointed about the company’s competitive advantage. ROE may also provide insight into how the company management is using financing from equity to grow the business.

A sustainable and increasing ROE over time can mean a company is good at generating shareholder value because it knows how to reinvest its earnings wisely, so as to increase productivity and profits. In contrast, a declining ROE can mean that management is making poor decisions on reinvesting capital in unproductive assets.

B

Dividend per share (DPS) is the sum of declared dividends issued by a company for every ordinary share outstanding. The figure is calculated by dividing the total dividends paid out by a business, including interim dividends, over a period of time by the number of outstanding ordinary shares issued.

Dividend Per Share Formula:

DPS = Total dividends paid out in a year/outstanding shares of the company

This ratio can tell how much dividend was earned by owning the stocks of that particular company over a period of time. A rising DPS speaks highly of the company because it shows that the company has long term sustained earnings and has confidence in sharing its profits with shareholders.

C

If a company has excess earnings and decides to pay a dividend to common shareholders, then an amount is declared, in addition to the date when this amount will be paid out to the shareholders. Usually, both the date and the amount is determined on a quarterly basis, after a company finalizes its income statement and the board of directors meets to review the company's

D

Earnings per share (EPS) is calculated as a company's profit divided by the outstanding shares of its common stock. The resulting number serves as an indicator of a company's profitability. It is common for a company to report EPS that is adjusted for extraordinary items and potential share dilution. The higher a company's EPS, the more profitable it is considered to be.

Earnings per Share Formula

There are several ways to calculate earnings per share.

Below are two versions of the earnings per share formula:

​EPS = (Net Income – Preferred Dividends) / End of period Shares Outstanding

EPS = (Net Income – Preferred Dividends) / Weighted Average Shares Outstanding