How to calculate required annual dividend on preferred stock?
Every preferred dividend comes with a percentage rate, so all you need to do is multiply that percentage by the par value to get the preferred dividend per share. Then you just multiply by the total # of preferred shares outstanding to get the total preferred dividend. Remember, the preferred dividend might not be paid in the current year, but they are typically cumulative, which means it has to be paid in the subsequent year, on top of the normal annual dividend.
For example, if preferred dividend has a par value of $100, and an interest rate of 6%, and there are 20,000 preferred shares outstanding, then the annual required preferred dividend would be $120,000.
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What is redeemable preferred stock?
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What is the difference between common and preferred stock?
The main difference is that common stockholders have voting rights while preferred stockholders do not. However, preferred stockholders are guaranteed rights to a share in the profits through a dividend. Additionally, preferred stockholders have liquidation preference, which means they get their money back before any common shareholders if the company’s assets are liquidated.