When you are considering investing in a corporation, reviewing the financials is a requirement for conducting your due diligence. You want to assess a company's stability, understand its debt-to-assets ratio and determine the availability of cash, among other factors. Any potential shareholder also wants to know whether the company regularly pays dividends and if so, in what amount. Shareholder dividends are routinely reported in a company's annual report. But if you do not have access to that document, you can calculate the dividend amount using balance sheet and income statement data.
Find the entry labeled "Retained Earnings" on the balance sheet from the current and previous fiscal year.
Look for the year-end net earnings on the current year's balance sheet.
Add the net earnings of the current year to the previous year's retained earnings. For example, if the net earnings are $500,000 and last year's retained earnings were $1 million, the calculation would be $1.5 million.
Deduct the current year's retained earnings from the result. If the current year's retained earnings are $1.25 million, the calculation is $1.5 million minus $1.25 million equals $250,000 in dividends paid.
Items you will need
- Balance sheets from last year and current year
- Income statement for current year