How to Calculate Cumulative Dividends Per Share

by Matt McGew

Cumulative preferred stock is a type of preferred stock issued by corporations. This type of preferred stock receives all payments from missed dividends before other types of stock issued by the company receive current dividend payments. By determining the fixed dividend amount from the company's prospectus and the number of missed dividend payments, you can manually calculate a company's cumulative dividend per share of preferred stock owed to stockholders.

Determine the dividend rate for a specific company's preferred stock. You can find this information in the company's preferred stock prospectus. For example, assume a company's preferred stock pays a 6 percent dividend per year.

Determine the par value of a single share of the company's preferred stock. You can also find the par value of the company's preferred stock listed on the company's prospectus. For example, assume the par value of the company's preferred stock is $100.

Multiply the annual dividend rate by the par value of the cumulative preferred stock. Continuing the same example, .06 x $100 = $6. This figure represents the annual dividend paid per share of preferred stock.

Divide the annual dividend by 4 to determine the company's quarterly dividend payment. Continuing the same example, $6 / 4 = $1.50.

Determine the number of quarterly preferred dividend payments that the company has missed. You can find this information in the company's quarterly and annual reports. For example, assume the company has not made a preferred dividend payment for 5 quarters.

Determine the cumulative dividend per share of preferred stock. Multiply the number of missed quarterly preferred dividend payments by the company's quarterly dividend payment. Continuing the same example, $1.50 x 5 = $7.50. This figure represents the cumulative dividend per share of preferred stock owed by the company.

References

  • "Principles of Finance"; Scott Besley and Eugene Brigham; 2008

About the Author

Since 1992 Matt McGew has provided content for on and offline businesses and publications. Previous work has appeared in the "Los Angeles Times," Travelocity and "GQ Magazine." McGew specializes in search engine optimization and has a Master of Arts in journalism from New York University.

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