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Dividend Rate

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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. 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.



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