Earnings per Share (EPS)

How to read it

The trend matters more than any single value:

• Consistently growing EPS: the engine that allows dividend increases year after year without stretching the payout.
• Flat EPS: the dividend can only grow by eating into payout headroom, which has a limit.
• Declining EPS: over time it pressures the dividend, even if the company maintains it for years out of commitment to shareholders.

The buyback nuance

EPS can grow without total profit growing: if a company buys back and retires shares, the same profit is spread across fewer shares. Well-executed buybacks create shareholder value, but it is worth separating how much EPS growth comes from the business and how much from share count reduction — especially if the company borrows to buy back stock.

Limitations

Net income is an accounting figure: one-offs, provisions and perimeter changes can distort it in both directions. That is why EPS is best complemented with free cash flow and reviewed across several years rather than a single one.