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Fritz Corporation has 800,000 shares of preferred stock and 1,800,000 shares of common stock. The cumulative preferred stock has a stated dividend of $2.50 per share. Under normal conditions, Kreisler pays out 30% of earnings available to common stockholders; however, because of a severe recession, Fritz retained all earnings last year. This year, Fritz earned net income of $6.4 million.

Calculate the dividend per share to be received by the common stockholders this year.

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Solution Summary

Explanation is given about how to compute it (185 words) and then the computation is shown.

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The preferred stock has two features that are important to this problem. First, it has a maximum dividend per share each year. That is the $2.50 stated dividend. Anything over this maximum goes to common shareholders UNLESS there is a cumulative feature. That is the ...

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Carol Sargent, PhD
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  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
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