# How to Calculate the Annual Dividend on Preferred Shares

Preferred shares of stock represent a hybrid between debt and equity. The shares typically have no voting rights but are promised a certain dividend each year that must be paid prior to common shareholders receiving a dividend. In addition, if the company goes out of business, the preferred shareholders get paid from the company’s remaining assets prior to any common shareholders receiving anything. Knowing how to calculate the annual dividend paid on preferred shares allows you to figure out how much you’ll be earning each dividend payment.

#### TL;DR (Too Long; Didn't Read)

To calculate the annual dividend on preferred shares, you can multiply the stock's par value by the dividend rate.

## Preferred Share Annual Dividend Formula

Every preferred stock has a par value and a dividend rate. The preferred share dividend formula only incorporates the par value of the preferred shares, regardless of what you paid for the stock. To find the annual dividend, multiply the par value by the dividend rate. For example, if the preferred shares have a par value of \$50 and a dividend rate of 6 percent, multiply \$50 by 0.06 to find that the preferred share pays a \$3 annual dividend.

## Dividend Payment Formula

To calculate how much you’ll receive on any particular dividend payment, you need to also know how often the preferred shares pay dividends each year and how many shares you own. First, divide the annual dividend payment by the number of payments per year to find the amount of the periodic dividend payment per preferred share you own. Second, multiply the periodic dividend payment by the number of shares you own.

For example, say you have 100 shares of a preferred stock that pays a \$3 annual dividend but pays quarterly dividends. First, divide \$3 by 4 to find that the quarterly dividend is \$0.75 per quarter. Then, multiply \$0.75 by 100 to find that you’ll receive \$75 in dividend payments each quarter.