Bayer Corporation has outstanding 1000 shares of 100 par val

Bayer Corporation has outstanding 1,000 shares of $100 par value, 7% cumulative and nonparticipating preferred stock, and 20,000 shares of $10 par value common stock. Last year the company paid no dividends, but this year it distributed $40,000 in dividends. What portion of the $40,000 will common stockholders receive?

Solution

Prederred dividends outstanding = 1000 * 100 * 7% = 7000

Dividends receivable to common stockholders = Total dividend - preferred dividend = 40000 - 7000 = 33000

Dividend per share to common shareholder = 33000/ 20000 = 1.65