Andrews Company has $80,000 available to pay dividends. It has 2,000 shares of 1

Question

Andrews Company has $80,000 available to pay dividends. It has 2,000 shares of 10%, $100 par, preferred stock and 30,000 shares of $10 par common stock outstanding. The preferred stock is selling for $125 per share, and the common stock is selling for $20 per share.

Preferred stock is fully participating and cumulative. Preferred dividends are 1 year in arrears at the beginning of the year.

   

For 1(a), compute the dividend yield on the preferred stock and the common stock.

Preferred Common Dividend in Arears 20,000 0 Current preferred dividends 20,000 common proportional share 0 30,000 Remainder Total

Explanation / Answer

Answer: Dividend Yield=(DPS/MPS)*100

Preferred Dividend=(20/125)*100

=16%

Common dividend=(1/20)*100

=5%

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