How to Calculate Cash Dividends on Non Convertible Preferred Stock

by Mark Kennan

Non-convertible preferred stock refers to preferred shares that do not allow the investor the option of changing the preferred shares into common shares. Some preferred shares, called convertible preferred shares, permit shareholders to exchange the preferred shares for common shares at a preset ratio. For example, a convertible preferred stock may offer the option of trading in two preferred shares to get one share of the company's common stock. The non-convertibility of the shares does not affect the calculation of the cash dividend paid on the preferred shares.

1. Divide the non-convertible preferred stock dividend percentage by 100 to convert to the dividend rate. For example, if the non-convertible preferred stock pays a 9 percent dividend, divide 9 by 100 to get 0.09.

2. Multiply the dividend rate by the par value, shown on the stock certificate, to calculate the cash dividend per share of preferred stock. The price you paid for the share has no impact on the dividend paid. Continuing the example, if the stock has par value of $30, regardless of whether you paid $5 of $50 per share, multiply $30 by 0.09 to find the dividend per share equals $2.70.

3. Multiply the dividend per share by the number of shares you own to calculate the total cash dividend on your non-convertible preferred shares. Finishing the example, if you have 500 shares, multiply $2.70 by 500 to find the total cash dividend equals $1,350.

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