EPS and dividend yield
What a company earns for each share, what it pays out, and what that payout is worth against the share price
Index figures as on 31 August 2026
Verified 16 October 2026
For training and education only. Not investment advice.
Trainer notes
Ask: a company announces a '40% dividend'. What return does a shareholder get? Most will say 40%, or something close. Keep the answer for slide 5.
EPS says how much profit each share earned. Dividend yield says how much cash each rupee of price received.
A company keeps part of its profit to run and grow the business, and may pay part out as dividends. These two ratios look at each side.
Trainer notes
EPS is about profit, whether or not it is paid out. Dividend yield is about cash actually paid, set against what the share costs today. A company can have a high EPS and pay no dividend at all.
Four terms, one share
EPS
Earnings per share: profit after tax for shareholders ÷ weighted average number of shares in the year.
Dividend
Dividend per share: the cash paid out for each share in a year. The company decides the amount each time.
Payout ratio
Dividend per share ÷ EPS. The share of profit paid out. The rest is kept in the business.
Dividend yield
Dividend per share ÷ share price × 100. The cash received for each ₹100 of today's share price.
Source for the EPS definition: Ind AS 33, Earnings per Share, paragraphs 10 and 19.
Trainer notes
Ind AS 33 is the Indian accounting standard on earnings per share. 'Profit for shareholders' means profit attributable to ordinary (equity) shareholders, after preference dividends. EPS is in rupees per share; payout ratio and dividend yield are percentages.
Working out EPS
ONE COMPANY
Profit after tax for the year: ₹120 crore.
Shares: 40 crore at the start of the year. The company issues 8 crore new shares exactly halfway through the year.
- The new shares were in issue for half the year, so they count as 8 × 6 ÷ 12 = 4 crore.
- Weighted average number of shares: 40 + 4 = 44 crore.
- EPS = 120 ÷ 44 = ₹2.73 a share (rounded).
- Using the year-end count of 48 crore would give ₹2.50, though the new money was in the business for only half the year.
Result: EPS divides profit by the average number of shares during the year, not the count on the last day.
Illustration with an invented company and assumed figures.
Trainer notes
Ind AS 33 requires the weighted average because the company's capital changed during the year. Bonus shares and splits are treated differently: they are counted as if they had always existed, and earlier years are restated (next-but-one slide).
A '40% dividend' is not a 40% return
ONE SHARE
Face value ₹10. Share price ₹200. Earnings per share ₹10.
The company announces a dividend of 40%, meaning 40% of the face value.
- Dividend per share: 40% of ₹10 = ₹4.
- Dividend yield: 4 ÷ 200 × 100 = 2%. The '40% dividend' is 2% of what the share costs today.
- Payout ratio: 4 ÷ 10 = 40% of profit paid out. ₹6 a share stays in the business.
- If the price rises to ₹250 and the dividend stays ₹4, the yield falls to 4 ÷ 250 × 100 = 1.6%.
Result: Quote the yield on the share price, not the dividend as a per cent of face value.
Illustration with assumed figures. Not a view on any company.
Trainer notes
Face value is the nominal value printed on the share, often ₹1, ₹2 or ₹10. It has little to do with the price the share trades at. Return to the opening question: the room's '40%' was a per cent of face value.
What moves EPS when profit does not
| Event | Shares | Effect on EPS |
|---|---|---|
| Buyback | Fewer shares | Rises with profit unchanged. A rise in EPS is not always a rise in profit. |
| New shares issued for cash | More shares | Falls, unless profit rises enough to match the new shares. |
| Bonus issue or split | More shares, no new money | Falls in proportion. Earlier years' EPS is restated on the new count, so the years stay comparable. |
| Options, warrants, convertibles | May become shares later | Diluted EPS assumes the dilutive ones do. Companies report basic and diluted EPS side by side. |
Source: Ind AS 33, Earnings per Share, paragraphs 64 (bonus issues and splits) and 66 (basic and diluted EPS shown together).
Trainer notes
Basic EPS uses shares already in issue. Diluted EPS adds shares that could be created from options, warrants or convertible securities, so it is the same or lower. When comparing EPS over several years, check that the figures are on the same share count.
Reading a dividend yield
It moves with price
With the same dividend, a lower share price means a higher yield. A high yield can follow a fall in price, or a payout that may not be repeated.
It looks back
It is usually worked out from dividends already paid, such as those of the last twelve months. The next one is for the company to decide.
Kept profit counts too
Profit not paid out stays in the business. A low yield can mean a company is reinvesting, not that it is earning little.
Take-away: Total return to a shareholder is dividends received plus the change in the share price.
Source for the twelve-month basis: NSE Indices, Methodology Document for Equity Indices, September 2026 (Nifty Dividend Opportunities 50).
Trainer notes
A one-off special dividend can make a trailing yield look high for a year. Ask whether the dividend is regular. Do not describe a high-yield share as income that is assured; dividends can be cut or stopped.
Where the Nifty 50 stands
Index-level figures as on 31 August 2026.
- NIFTY 50 YIELD
- 1.17%The index's dividend yield as published by NSE Indices.
- EARNINGS YIELD
- 4.91%1 ÷ the Nifty 50 P/E of 20.36: earnings as a share of the price.
- DIV OPPS 50 YIELD
- 2.19%Nifty Dividend Opportunities 50: 50 firms chosen on yield and stability.
- NIFTY 50 CLOSE
- 24,080Closing level on 31 August 2026: 24,080.40.
Sources: NSE Indices, daily index close file for 31 Aug 2026; NSE Indices, Methodology Document for Equity Indices, September 2026.
Trainer notes
Earnings per index unit is about 24,080.40 ÷ 20.36 = 1,183. Market figures are shown with a lag of at least 30 days, under Trustner's rule on price data. State the figures and their date; do not say whether a yield is high or low.
If you learnt this from older material
What older decks say
- Dividends are tax-free for most investors; the company pays dividend distribution tax.
- TDS on an individual's dividends above ₹5,000 a year (the rule from 2020 to 2025).
- Dividend yield funds need at least 65% in equity (the earlier SEBI rule).
What holds now
- Dividends from 1 April 2020 are taxed in the investor's hands (individuals: slab rate).
- 10% TDS; none for an individual up to ₹10,000 a year from a company (from 1 Apr 2025).
- At least 80% in equity, under SEBI's revised categories of 26 February 2026.
Sources: Finance Bill 2020 and Finance Bill 2025, memoranda (indiabudget.gov.in); SEBI Master Circular for Mutual Funds, 20 Mar 2026.
Trainer notes
Dividend distribution tax was paid by the company until 31 March 2020. TDS is not an extra tax; it is credited against the investor's final tax. From 1 April 2026: Income-tax Act 2025, s.393(1) Table 7 (10%) and s.393(4) Table 10(f) (no TDS for an individual up to ₹10,000, non-cash payment).
Four things people get wrong
Misconception'Higher EPS means a more valuable share.'
What is trueEPS depends on how many shares exist. An EPS of ₹50 or ₹5 says nothing about value until it is set against the price.
Misconception'A 40% dividend is a 40% return.'
What is trueIt is 40% of face value. On a ₹200 share with a ₹10 face value, that is a 2% yield.
Misconception'A dividend is free money.'
What is trueIt is paid out of the company's own cash, so the company holds that much less afterwards. For an individual it is taxed at slab rate.
Misconception'EPS rose, so profit rose.'
What is trueA buyback can lift EPS while profit stays flat. Check the profit figure itself.
Trainer notes
On the third point: a shareholder who wants cash can also sell some shares; the dividend is one way of receiving value, not extra value. On the fourth: one-off gains can also lift EPS for a single year.
Four questions to ask of EPS or a yield
Basic or diluted?
And standalone or consolidated. The figures can differ for the same company and year.
Which period?
A full year, the last four quarters, or one quarter. A quarter's EPS is not a year's.
Anything unusual?
A one-off gain, a buyback, a bonus issue or a split can move the number.
Regular or special?
Is the dividend paid most years, or a one-off payment that may not recur?
Take-away: We explain these ratios. We do not use them to tell a client what to buy.
Trainer notes
This is the slide to rehearse. When a client quotes a share's EPS or yield from a website, these four questions are the conversation.
Check yourself
Question 1: A company earns ₹90 crore after tax. It has 30 crore shares for the first half of the year and 20 crore after a buyback at mid-year (assumed). What is its EPS?
Answer: Weighted average: 30 × 0.5 + 20 × 0.5 = 25 crore shares. EPS = 90 ÷ 25 = ₹3.60.Question 2: A share costs ₹400, pays a dividend of ₹6 a year and has EPS of ₹20 (assumed). What are its dividend yield and payout ratio?
Answer: Yield: 6 ÷ 400 × 100 = 1.5%. Payout ratio: 6 ÷ 20 = 30%.Question 3: A resident individual client receives ₹15,000 of dividends in a year from one company. How is it taxed?
Answer: It is added to income and taxed at the client's slab rate. Because it is above ₹10,000 from one company, 10% TDS is deducted (where PAN is given), and that TDS counts towards the final tax.
Trainer notes
In question 1, using the year-end count of 20 crore would give ₹4.50, which overstates EPS.
Sources and disclaimer
Sources for the figures in this explainer
- EPS on weighted average shares; restatement for bonus and split; basic and diluted EPS: Ind AS 33, Earnings per Share, paragraphs 10, 19, 64 and 66.
- Nifty 50 dividend yield 1.17%, P/E 20.36, close 24,080.40; Nifty Dividend Opportunities 50 yield 2.19%: NSE Indices, daily index close file, 31 Aug 2026.
- Nifty Dividend Opportunities 50 design and twelve-month dividend basis: NSE Indices, Methodology Document for Equity Indices, September 2026.
- Dividends taxable for the recipient from 1 Apr 2020: Budget Speech and Memorandum to the Finance Bill 2020. ₹10,000 limit: Finance Bill 2025 memo; Income-tax Act 2025, s.393.
- Dividend Yield Fund, at least 80% in equity: SEBI Master Circular for Mutual Funds, 20 Mar 2026. Revision date and earlier 65%: Trustner verified facts file.
- All companies, shares and quiz figures are invented for illustration. They do not refer to any real company.
This material is for training and investor education only. It is not investment, tax or legal advice and is not a recommendation to buy, sell or hold any security or scheme. Examples use assumed figures unless a source and date are shown. Mutual fund investments are subject to market risks; read all scheme related documents carefully. Trustner Asset Services Pvt. Ltd. is an AMFI-registered Mutual Fund Distributor (ARN-286886).