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How to Calculate Dividend Distribution on Preferred Stocks

Original post by Mark Kennan of Demand Media

Preferred shares typically pay more in dividends.

When you invest in preferred shares of a company, you are investing more for the dividend payments than for growth in the stock price. If a company issues preferred shares, it must pay the promised dividends on those shares before it can pay any dividends on the company's common stock. You can find the par value and the preferred dividend percentage in a company's preferred stock prospectus. The par value is the price at which the company issued the stock.

Contents

Step 1

Divide the dividend percentage by 100 to convert to a decimal. For example, if the stock pays a 4 percent dividend, divide 4 by 100 to get 0.04.

Step 2

Multiply the dividend as a decimal by the par value to find the preferred dividends per share. In the example from the previous step, if the par value equals \$25, multiply \$25 by 0.04 to get \$0.10.

Step 3

Multiply the dividends per share by the number of preferred shares you own to calculate the dividend distribution you will receive for your preferred stocks. In this example, if you own 400 shares, multiply \$0.10 by 400 to find you will earn \$40 in preferred stock dividends.

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