Question

On December 31, 2018, Adelphi Corporation has outstanding 1,000 shares of $100 par value, 6% cumulative and nonparticipating preferred stock, and 19,000 shares of $10 par value common stock. Preferred dividends were paid in 2016 but were not paid in 2017. During 2018, Alpha distributed $30,000 in dividends. Use this information to determine for 2018 the dollar amount of dividends that will be distributed per Common Share. Round answer to closest cent.

Answer 1

Answer 2

Annual preferred dividends = Number of preferred shares outstanding x Par value per preferred share x Preferred dividend rate

= 1000 x 100 x 6%

= $6,000

Preferred dividend was not paid in the year 2017. Since preferred stock is cumulative, hence in the year 2018, Preferred dividend will be paid for 2 years i.e. dividend in arrears for 2017 and dividend for year 2018.

Preferred dividend paid in the year 2018 = Annual preferred dividends x 2

= 6,000 x 2

= $12,000

Total dividends paid in the year 2018 = $30,000

Dividend paid to common stockholders in year 2018 = Total dividends paid in the year 2018 - Preferred dividend paid in the year 2018

= 30,000 - 12,000

= $18,000

Dividend per common share in year 2018 = Dividend paid to common stockholders in year 2018/Number of outstanding common shares

= 18,000/11,000

= $1.64

answered by: APC