How to Calculate Proposed Dividend

A public company may recommend or propose a final dividend which is subject to the approval by the shareholders at the annual general meeting of the company. Here you'll learn how to calculate proposed final dividend:

Example:
CTU Ltd has the following share capital as at 31 December Year 20:
Authorized share capital:
1,000,000 7% Preference Shares of $0.50 each: $500,000
20,000,000 $0.50 ordinary shares: $20,000,000

Allotted and fully paid capital:
800,000 7% Preference Shares of $0.50 each: $500,000
15,000,000 $0.50 ordinary shares: $20,000,000

At 31 December Year 20, the directors of the company recommended a final dividend on the ordinary shares of $0.02 per share. Calculate the proposed dividend.

Solution:
Proposed dividend on Ordinary Shares = $0.02 * 15,000,000 shares = $300,000 (This amount will appear on the company's balance sheet as 'Current Liabilities' as well as in the profit and loss account)

* Next: How to Calculate Dividend Growth Rate
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