Dividend per Share, preferred and common stocks

Question

Dividends Per Share

Seventy-Two Inc., a developer of radiology equipment, has stock outstanding as follows: 60,000 shares of cumulative preferred 3% stock, $20 par and 400,000 shares of $25 par common.

During its first four years of operations, the following amounts were distributed as dividends: first year, $34,000; second year, $72,000; third year, $80,000; fourth year, $120,000.

Determine the dividends per share on each class of stock for each of the four years. Round all answers to two decimal places. If no dividends are paid in a given year, enter "0.00".

Answer 1

To calculate dividends per share for each class of stock, we need to calculate the total dividend for each year and then divide the total dividend by the number of shares for each class of stock.

Here are the calculations for each year:

First Year:

Total Dividend = $34,000

Dividends per Preferred Share = $34,000 / 60,000 shares = $0.57

Dividends per Common Share = $34,000 / 400,000 shares = $0.09

Second Year:

Total Dividend = $72,000

Dividends per Preferred Share = $72,000 / 60,000 shares = $1.20

Dividends per Common Share = $72,000 / 400,000 shares = $0.18

Third Year:

Total Dividend = $80,000

Dividends per Preferred Share = $80,000 / 60,000 shares = $1.33

Dividends per Common Share = $80,000 / 400,000 shares = $0.20

Fourth Year:

Total Dividend = $120,000

Dividends per Preferred Share = $120,000 / 60,000 shares = $2.00

Dividends per Common Share = $120,000 / 400,000 shares = $0.30

So, the dividends per share for each class of stock for each of the four years are as follows:

First Year:

Preferred: $0.57

Common: $0.09

Second Year:

Preferred: $1.20

Common: $0.18

Third Year:

Preferred: $1.33

Common: $0.20

Fourth Year:

Preferred: $2.00

Common: $0.30