When companies pay dividends, they reward investors for owning the company. However, that decreases the money the company has to expand the business or research new products. Investors may be concerned if a company is paying out large sums in total dividends because it may limit the company's ability to remain profitable in the future. When figuring the total cash dividends paid by a company, you must calculate both the common stock dividends and the preferred stock dividends.
1. Look up the company's per share preferred stock dividends, preferred shares outstanding, per share common stock dividends and common shares outstanding in the annual report.
2. Multiply the preferred stock dividends per share by the preferred shares outstanding to find the total preferred stock dividends paid. For example, if the company paid $3 per preferred share and has 40,000 preferred shares outstanding, multiply $3 by 40,000 to get $120,000 paid in preferred share dividends.
3. Multiply the common stock dividends per share by the common shares outstanding to find the total common stock dividends paid. For example, if the company paid $1.50 per common share and has 100,000 common shares outstanding, multiply $1.50 by 100,000 to get $150,000 paid in common share dividends.
4. Add the preferred share dividends plus the common share dividends to find the total cash dividends paid by the company. In this example, add $120,000 to $150,000 to find the company paid a total of $270,000 in dividends.