Preferred Stock Dividend Paid
Cash Dividends Distributed to Preferred Shareholders
Preferred Stock Dividend Paid is the actual cash outflow for dividends declared and paid on outstanding preferred stock during the period. Preferred dividends are typically fixed-rate obligations that must be paid before any common stock dividends, making this a priority claim on the company's cash resources in the financing section of the cash flow statement.
What It Represents
Preferred Stock Dividend Paid is the cash the company hands over to preferred shareholders for their dividend rights. Preferred stock usually carries a fixed dividend rate (e.g., 6% of par value), paid quarterly or semi-annually.
This payment is a contractual-like obligation—preferred holders get paid first, and if cumulative, any missed dividends pile up as arrears.
It's not an expense (doesn't hit income statement) but a distribution of earnings.
A Simple Example
Company has $50 million in preferred stock at 8% dividend rate.
- Annual dividend obligation: $4 million
- Pays quarterly → $1 million per quarter
- Cash flow statement shows $4 million outflow as 'Preferred Stock Dividend Paid'
- If skips a quarter (cumulative): $1M arrears accumulate, must pay before common dividends
Cash leaves the company, reducing financing cash flow.
Why It's in Financing Activities
Dividends are returns of capital to equity owners, not operating costs.
- Similar to common dividends and share repurchases
- Reflects capital allocation to preferred holders
- Separate from interest paid (which may be operating or financing)
Where It Shows Up
In the cash flow statement financing section:
- 'Preferred Stock Dividend Paid'
- 'Dividends on Preferred Stock'
- Sometimes grouped in 'Cash Dividends Paid' with common separate
Footnotes disclose rate, arrears, and payment schedule.
Key Considerations
- Fixed obligation reduces flexibility for common dividends
- Cumulative arrears create backlog pressure
- Size relative to earnings shows coverage
- Growth signals increasing preferred issuance
- Non-cash if stock dividend instead
Large preferred dividends can constrain common shareholder returns.
Key Takeaways
Cash paid to satisfy preferred stock dividend rights.
Priority claim—paid before common dividends.
Financing outflow, not expense.
Fixed rate, often cumulative.
Reflects cost of preferred capital structure.
Monitor coverage and impact on common dividend capacity.
Preferred Stock Dividend Paid
Cash Dividends Distributed to Preferred Shareholders
Preferred Stock Dividend Paid is the actual cash outflow for dividends declared and paid on outstanding preferred stock during the period. Preferred dividends are typically fixed-rate obligations that must be paid before any common stock dividends, making this a priority claim on the company's cash resources in the financing section of the cash flow statement.
Table of Contents
What It Represents
Preferred Stock Dividend Paid is the cash the company hands over to preferred shareholders for their dividend rights. Preferred stock usually carries a fixed dividend rate (e.g., 6% of par value), paid quarterly or semi-annually.
This payment is a contractual-like obligation—preferred holders get paid first, and if cumulative, any missed dividends pile up as arrears.
It's not an expense (doesn't hit income statement) but a distribution of earnings.
A Simple Example
Company has $50 million in preferred stock at 8% dividend rate.
- Annual dividend obligation: $4 million
- Pays quarterly → $1 million per quarter
- Cash flow statement shows $4 million outflow as 'Preferred Stock Dividend Paid'
- If skips a quarter (cumulative): $1M arrears accumulate, must pay before common dividends
Cash leaves the company, reducing financing cash flow.
Why It's in Financing Activities
Dividends are returns of capital to equity owners, not operating costs.
- Similar to common dividends and share repurchases
- Reflects capital allocation to preferred holders
- Separate from interest paid (which may be operating or financing)
Where It Shows Up
In the cash flow statement financing section:
- 'Preferred Stock Dividend Paid'
- 'Dividends on Preferred Stock'
- Sometimes grouped in 'Cash Dividends Paid' with common separate
Footnotes disclose rate, arrears, and payment schedule.
Key Considerations
- Fixed obligation reduces flexibility for common dividends
- Cumulative arrears create backlog pressure
- Size relative to earnings shows coverage
- Growth signals increasing preferred issuance
- Non-cash if stock dividend instead
Large preferred dividends can constrain common shareholder returns.
Key Takeaways
Cash paid to satisfy preferred stock dividend rights.
Priority claim—paid before common dividends.
Financing outflow, not expense.
Fixed rate, often cumulative.
Reflects cost of preferred capital structure.
Monitor coverage and impact on common dividend capacity.
Related Terms
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