CapiCal Enterprises recorded net income of $20 million for the year. The company has 1,500,000 preferred shares outstanding, with a stated dividend of $.80. It also has 5 million common shares outstanding. If the company wishes its total dividend payout for the year to equal 20% of its net income, what will be the dividend paid on each common share?

Question

Quizplus · Accepted Answer

The total preferred dividend payout will be:
$0.80 x 1,500,000 = $1,200,000
The amount available for common dividends will be:
$20,000,000 – $1,200,000 = $18,800,000
The total dividend payout for common shares is:
$18,800,000 x 20% = $3,760,000
The dividend paid on each common share will be:
$3,760,000/5,000,000 = $0.56

CapiCal Enterprises Recorded Net Income of $20 Million for the Year