Definition:

Forward Dividend per Share is a financial metric that estimates the total dividends a shareholder is expected to receive over the next 12 months for each share they own, based on the company's announced or projected dividend payments.

Formula:

Forward Dividend per Share = (Expected Annual Dividends) / (Number of Shares Outstanding)

How to use the metric:

Investors use the Forward Dividend per Share to assess the potential income from dividends they might receive from holding a company's stock. It helps in evaluating the attractiveness of a stock for income-focused investment strategies.

Limitations:

The Forward Dividend per Share is based on projections and assumptions, which may not materialize if the company changes its dividend policy or faces financial difficulties. It does not account for stock price fluctuations or capital gains.

Applies to:

This metric is most applicable to industries with established companies known for regular dividend payments, such as utilities, consumer staples, and real estate investment trusts (REITs).

Doesn't apply to:

It is less applicable to industries where companies typically do not pay dividends, such as technology or biotech, where firms often reinvest profits into growth rather than distributing them as dividends.

Summary:

Forward Dividend per Share is a useful metric for estimating future dividend income from a stock, particularly in dividend-paying industries. However, it relies on projections that may not be realized, and it is less relevant for industries where dividends are not a primary focus.