How to Calculate Share Dividend

Dividends are the share of profit distributed to shareholders. They come in two types: fixed and variable. Preferred stockholders will receive a fixed rate while common stockholders are entitled to variable dividends that will be based solely on the performance of the company.

Examples:

(1) A stock trader bought 5,000 $1 8% Preference Shares at $3 each and 10,000 $1 Ordinary Shares at $4 each. At the end of the year, the directors of the company declared a dividend of 30% on the ordinary shares. Calculate the total dividends.
Solution:
Preference share dividends = 8% * 5,000 * $1 = $400
Ordinary share dividends = 30% * 10,000 * $1 = $3,000
Therefore, the total dividends = 400 + 3,000 = $3,400
(Note that we should use nominal value, not market price, as part of the calculation)

(2) An investor owned 55,000 7.5 percent preferred stocks which were issued at a par value of $0.50 per share, then:
Total Preferred Dividends = 55,000 shares * $0.50 * 7.5% = $2,062.50

* Next: How to Calculate Share Premium
0 comments: