How to Calculate Preferred Dividends

Preferred stock (or preference shares) is a special class of stock that pays a fixed dividend set at the time of issuance. Also, preferred dividends must be paid before common stock dividends. To calculate the dividends for preferred stocks, you need to multiply the par value of the shares by the dividend percentage.

Example 1:
If the dividend percentage is 8 percent and the preferred stock was issued at $20 per share, then the annual dividend is: 8% * $20 = $1.60 per share.

Example 2:
If you owned 10,000 6.5 percent preferred shares which were issued at a par value of $50 per share, then:
The dividend per share of preferred stock = $50 * 6.5% = $3.25
Total Preferred Dividends = 10,000 shares * $50 * 6.5% = $32,500

Suppose the preferred stock is trading at $60 per share, and you want to calculate the dividend yield:
Dividend Yield Ratio = (Dividend Per Share / Market Price Per Share) * 100% = (3.25 / 60) * 100% = 5.4%

* Next: Dividend Per Share (DPS) Calculation
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