Oklahoma. Partridge Theatre Inc. has declared the following annual dividends over a sixyear period: 2009, $18,000; 2010, $40,000; 2011, $80,000; 2012, $120,000; 2013, $150,000; and 2014, $228,000. During the entire period ended December 31 of each year, the outstanding stock of the company was composed of 40,000 shares of cumulative, preferred 1% stock, $75 par, and 200,000 shares of common stock, $5 par.
Instructions
1. Calculate the total dividends and the per-share dividends declared on each class of stock for each of the six years. There were no dividends in arrears on January 1, 2009. Summarize the data in tabular form, using the following column headings:
Year
Total
Dividends
Preferred Dividends Common Dividends
Total Per Share Total Per Share
2009 $ 18,000
2010 40,000
2011 80,000
2012 120,000
2013 150,000
2014 228,000
2. Calculate the average annual dividend per share for each class of stock for the six-year period.
3. Assuming a market price per share of $125 for the preferred stock and $7.60 for the common stock, calculate the average annual percentage return on initial shareholders’ investment, based on the average annual dividend per share (a) for preferred stock and (b) for common stock.
Answers:
1.
Year
Preferred Dividends Common Dividends
Total Per Per
Dividends Total Share Total Share
2009…………… $ 18,000 $18,000 $0.45 $ 0 $0.00
2010………… 40,000 40,000 1.00 0 0.00
2011…………… 80,000 32,000* 0.80 48,000 0.24
2012………… 120,000 30,000 0.75 90,000 0.45
2013…………… 150,000 30,000 0.75 120,000 0.60
2014………… 228,000 30,000 0.75 198,000 0.99
$4.50 $2.28
* $32,000 = (2010 dividends in arrears of $2,000) + (2011 current dividend of $30,000)
2.
Average annual dividend for preferred: $0.75 per share ($4.50 ÷ 6)
Average annual dividend for common: $0.38 per share ($2.28 ÷ 6)
3.
a. 0.60% ($0.75 ÷ $125)
b. 5.0% ($0.38 ÷ $7.60)