How can I calculate Dividends?

Question

I have 100,000 shares fo 9% cumulative pref. stock @$2.00 par value outstanding and 200,000 shares of common stock outstanding. The dividends per year were $9k year 1, $5,600 year 2, $20,000 year 3, $30,000 year 4 and 18,000 year 5. How much dividends would preferred holders get and how much would common get for each of the 5 years? I am also looking for the formula to calculate this out since I have others like this one. Thanks for any help!

Answer 1

There is insufficient data to conclusively answer the question.  You could come up with any number of scenarios that work but none certain to be correct.

Answer 2

The 9% preferred shares, assuming mngmt paid preferred divs every year,which they don't always do, is 9% times par value of $2.00 equals $0.18, or eighteen cents, per pfd share.   times 100K shares = $18K.

so this is tricky, b/c if mngmt is always making sure to pay pfd first, then all of year 1 and 2 divs would go to pfd, with $2K of year 2 dividends being made in arrears.  

at the end of year 2, this would leave $10,400 owed to pfd s/h in arrears.  so in year 3, $28,400 of divs paid would be to pfd shareholders, teh rest to common.  year 5 - all 18K goes to pfd s/h.

in the real world, it is common for pfd divs to be withheld for many years, even w/common share divs sometimes still being made.  or certain amounts of pfd share divs are withheld, just to make sure common s/h get some.