Preferred dividends Slater Lamp Manufacturing has an outstanding issue of prefer
ID: 2454637 • Letter: P
Question
Preferred dividends Slater Lamp Manufacturing has an outstanding issue of preferred
stock with an $80 par value and an 11% annual dividend.
a. What is the annual dollar dividend? If it is paid quarterly, how much will be paid
each quarter?
b. If the preferred stock is noncumulative and the board of directors has passed the
preferred dividend for the last three quarters, how much must be paid to preferred
stockholders in the current quarter before dividends are paid to common
stockholders?
c. If the preferred stock is cumulative and the board of directors has passed the preferred
dividend for the last three quarters, how much must be paid to preferred
stockholders in the current quarter before dividends are paid to common stockholders?
Explanation / Answer
a)Annual dividend = par value *rate
= 80 *.11
=$ 8.80
Number of quarters ina year = 4
Dividend per quarter = 8.8 /4 = 2.20
b)In case of non cummulative preference shares, dividend of past quarters or last year is not paid in current year.
so current dividend paid = $ 2.20 per share
c)In case of cummulative preference shares ,shareholders are paid for there past dividend due in a current year before common stockholders.
so .Past dividend = 2.20 *3 = 6.60
current quarter dividend = 2.20
Total dividend = 8.80 per share