[charity4684]

A company was organized in January 2007 and has 2,000 shares of $100 par value, 10%, nonparticipating preferred stock outstanding and 30,000 hares of $10 par value common stock outstanding. It ha declared and paid cash dividends each year as shown below. Calculate the total dividends distributed to each class of stockholder under each of the assumptions given.

Year 2007, Paid 15,000
Year 2008, Paid 36,000
Year 2009, Paid 60,000

I'm not asking for just the answers. I want to know how you would go about calculating this. Thanks!

[morgaine300]

Hi. First you need to know the required amount for the preferred stock, which is that 10%. (i.e. not the par value) There's two ways to figure it, but the easy way is to just take 10% of the number of shares. That is the required dividend per one share. You then need to know how much in total will be given to the preferred shareholders. (How many shares in total are there?)

That is the total that needs to be given to the preferred shareholders, each year, before the common shareholders can get anything. They are giving you the amount that is given in total dividends each year. Your answer to the above is first, and then anything left over goes to the common shareholders. However, you'll find that there isn't enough the first year to even cover the preferred. They can't get more than has been declared, so they just won't get it all.

Unfortunately it doesn't say whether it is cumulative or not, so I don't know if you need to worry about that portion the preferred didn't get the first year. That also would be more detailed to explain. But see how far this gets you.

[charity4684]

Unfortunately it doesn't say whether it is cumulative or not, so I don't know if you need to worry about that portion the preferred didn't get the first year. That also would be more detailed to explain. But see how far this gets you.

I have to do it both ways - cumulative and non cumulative

[morgaine300]

Well, for non-cumulative, you don't have to do anything further. In that case, the preferred shareholders just "lose" anything that couldn't be paid in any particular year.
i.e. if they were supposed to get 40K and there's only 30K of dividends declared,
They just never get that 10K.

However, when it's cumulative, they have to make up any of the lost dividends in a future year. So using my above example, that 10K that wasn't paid goes into "arrears." That's not an account, but just something they keep track of. So you just have to make note of that amount off to the side. Then when the next year comes, they get their current yearly requirement, and if anything can be paid from arrears, that comes next. So if they're supposed to get 40K each year, and the next year there's 45K of dividends declared, they can get all 40K of the requirement AND they can get 5K of what was put into arrears. (And the common shareholders still get nothing.) There will be 5K still left in arrears that will have to be paid in a future year. And so on. Only when the yearly requirement and anything in arrears is completely paid, do the common shareholders then get anything of the dividends left over.

Try this and see what you can come up with.

[charity4684]

Thanks for your help. This is what I came up with...

Non-Cumulative

Year 2007
Pref: 15,000
Common: 0

Year 2008
Pref: 20,000
Common: 16,000

Year 2009
Pref: 20,000
Common: 40,000

Cumulative

Year 2007
Pref: 15,000
Common: 0

Year 2008
Pref: 25,000
Common: 11,000

Year 2009
Pref: 20,000
Common: 40,000

[morgaine300]

All correct.

Very good, considering I gave you some wrong info to start with. It's 10% of the total value of the preferred stock (i.e. 2000 x $100 per share), not 10% of the shares. But I guess you managed to get through that snafu and get it anyway. :-)

[charity4684]

Thank you for all of your help!

[krish_saptak]

I want to find cash dividends for BSE listed Indian companies from 2001 to 2006. I have data of dividends paid par this time.What other information should I need to calculate cash dividend and how do I calculate it? I am sending data of dividend of one company.Figure in the brackets are the dividends paid on that date.
BAJAJ AUTOFINANCE LTD: 29/6/2006($3.66),29/6/2005($6.86),15/7/2004($5.49), 10/7/2003($4.12),10/7/2002($4.12),2/7/2001($2.74)

[morgaine300]

krish_saptak, please start your own thread as this one has been pretty much finished. We've also moved homeover over into the homework section under Education.

I'm wondering if this is actually finance. If so, it doesn't belong under accounting anyway. (Related but not technically the same subject. Although in the homework area, they are combined.) What other information you need to give is what exactly you are doing because this isn't really saying anything. You're saying you need to find the dividends, and then listing the dividends, meaning you seem to already have them. So I don't even get what you need. What this is, it's not related to the question that was asked by this original poster.

[UnigirlBelle]

I found this thread doing a search trying to find questions related to calculating dividends but I am still having difficulty understanding how to get the total dividend paid and total dividend per share. My study unit shows how to do dividend distribution which I'm not really sure on how it works and cannot find any example of how to get a dividend per share.

[brho0om91]

Please help
The records of Hoffman Company reflected the following balances in the stockholders' equity accounts at December 31, 2009:

Common stock, par $14 per share, 33,000 shares outstanding.

Preferred stock, 8 percent, par $12 per share, 7,500 shares outstanding.

Retained earnings, $216,000.

On January 1, 2010, the board of directors was considering the distribution of a $67,000 cash dividend. No dividends were paid during 2008 and 2009.

Required:

Determine the total and per share amounts that would be paid to the common stockholders and to the preferred stockholders under two independent assumptions (Round your Dividend per share to 2 decimal places. Omit the "$" sign in your response):

a. The preferred stock is noncumulative.
b. The preferred stock is cumulative.

a. Noncumulative:
Preferred Common
Total dividend $ $
Dividend per share $ $

b. Cumulative:
Preferred Common
Total dividend $ $
Dividend per share $ $


I found the a. Noncumulative:
Preferred Common
Total dividend $7,200
$59,800
Dividend per share $0.96
$1.81
But couldn't find the cumulative, please help