# Dividend Rate

#### Quick Summary of Dividend Rate

Dividend rate is how much money the dividend is over the coming year.

#### Full Definition of Dividend Rate

The dividend rate is the amount of dividends per share a company pays to stockholders over a period of time.

If the board of directors of XYZ Company declares a quarterly dividend of 22 cents per common share, the quarterly dividend rate is $.22. Some companies pay quarterly dividends based on a stated annual dividend rate (in the example, the annual dividend rate would be$.88). Whether stated or not, a dividend rate is often annualized to present the most recent quarterly dividend on a full-year basis. For preferred stock, the dividend rate is usually expressed as a percentage of par value. For example, preferred shares with a $100 par value and a 6% dividend rate would pay dividends of$6 per year. The dividend rate is also commonly used by financial institutions and investment companies to describe income distributions. For a mutual fund, the dividend rate is the most recent rate at which the fund distributes dividend and interest income. For a credit union, the dividend rate is comparable to the interest rate paid on deposits at banks.

Simply put, it is the amount of money paid out in the most recent period, multiplied by the number of payments per year, and adding any special dividends expected. This is per share owned.

$Dividend\ rate = (Amt\ paid\ last\ time) * (No.\ of\ payments\ per\ year) + (special\ dividend,\ if\ any)$

For instance, if a company paid $0.56 last quarter and it pays 4 times a year (typical for American firms) and it usually pays a$0.15 special dividend at the end of the year, then the dividend rate would be:

$0.56 * 4 + 0.15 = 2.24 + 0.15 = 2.39\ per\ share$

To calculate what the dividend yield is, then, all you do is take the dividend rate and divide it by the current stock price. If that company’s stock price is \$49.57, then the yield would be:

$\frac{\frac{2.39}{share}}{\frac{49.57}{share}} = \frac{2.39}{share} * \frac{share}{49.57} = \frac{2.39}{49.57} = 0.0482 = 4.82%$

Note that while the dividend yield will vary as the price of the stock varies, the dividend rate remains constant, only changing when the board of directors increases or decreases the dividend.

The total amount of the dividend paid out by the company is just the rate times the number of common shares outstanding.

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#### Definition Sources

Definitions for Dividend Rate are sourced/syndicated and enhanced from:

• A Dictionary of Economics (Oxford Quick Reference)
• Oxford Dictionary Of Accounting
• Oxford Dictionary Of Business & Management

This glossary post was last updated: 5th August, 2021 | 4 Views.