 Personal finance practice problem using OneNote. Calculating dividend payments. Prepare to get financially fit by practicing personal finance. You're not required to, but if you have access to OneNote, would like to follow along. We're in the icon on the left-hand side. Practice problems tab in the 12-20 calculating dividend payments tab. Also take a look at the immersive reader tool. The practice problems typically in the text area too with the same name, same number, but with transcripts, transcripts that can be translated into multiple languages either listened to or read in them. Remember that dividends represent a return on investments in stocks, stocks being an ownership interest in corporations, corporations being a separate legal entity that have their ownership interests broken out into standardized units of stocks or shares. We're also usually talking about publicly traded companies, those which have chosen to be traded on exchanges when we're thinking about our investment decisions. Dividends represent the return of the earnings. They're going to be coming out of the retained earnings to the owners, that being the shareholders. And that way they're similar to draws for a partnership or a corporation. However, in a partnership an individual partner might decide to have different level of draws than another partner. We cannot have one stock have a different number of dividends than another stock. We could have one owner having a different number of dividends because they have multiple stocks, but all the dividends need to be uniform because that's the beauty of making all the standard chunks or ownership interests basically being the same. Therefore the dividend policy needs to be determined by the board of directors and management. And also it's not the only form of return that we're going to get. It's one of two returns that we get from the shares of stocks. We might get the return of the dividends, the actual money or possibly stock dividends, but let's think about the cash dividends from the company. And we also might get then the valuation of the company going up possibly in part from the company retaining some of the dividends, holding onto some of their earnings and investing it to get a bigger return. And hopefully that will be reflected in the valuation of the stock. Okay, so the dividends. Now the dividend policy could be quarterly. It could be yearly. And they might have a dividend policy that basically is going to go up over time or they might try to tie it to income. And so if we looked at their dividends and we have their quarterly dividends such as this Q1 dividends per share, Q2, Q3 and Q4 where it got quarterly dividends that are going out. The dividends are going up over time. We could assume that this trend is going to go out into the future or possibly they're like a cyclical company. Maybe their income is greater in Q4 or something like that. But there's multiple ways we can then think about the dividend calculation. We can calculate them on a quarter by quarter basis. And this is great work to do and excel just to practice your tables just to reformat your tables in a few different ways. We're going to say that we own 440 shares. So one owner owns 440 shares. If we multiply that times the dividend per share for Q1 times 0.33 that's going to give us then our total dividends what we're going to get returning on the earnings of the company 14520. For Q2 we could do the same thing. We had 440 shares. We've got the same number of shares. The dividends are still 0.3333 cents per share. So once again 14520. For Q3 the dividends went up for quarter three. So now we got the same number of shares 440 but their dividends went up to 58 cents per share which is great multiplying that out. That's going to give us our 25520 per share. And then in Q4 the dividends went up again to 61 cents. So 61 times 440 that's going to give us our 26840. Now oftentimes it's useful for us to look at the dividends that happened on a year because remember we're going to try to be comparing the stock this stock possibly to other stocks and we usually break it down into standardized units of years. How many dividends are they giving out over the year? We could look at past trends and try to compare that to other companies and we could try to project into the future what the future trends will be because we're usually going to be making decisions on the margin as accountants or economists say from this time going forward in other words. So another way we can calculate this we could say the dividends for the year calculation like we could add up the four quarters of course right we could say okay now I got the four quarters so I'm going to take the 14520 plus the 14520 plus the 25520 plus the 26840 that would be for a year. But let's do it another way and this is going to assume that there's no changes in the shares that we have for example. So Q1 we're going to say is the 33 and then Q2 is the 33 Q3 is the 58 and then the 61 I'm just going to add those all up that means for the entire year we got $1.85 in total over the four quarters and if we have the same number of shares the whole time the 440 we didn't buy or sell any shares in other words we could take the 185 times the 440 to get to the 814 which should add up to the same number as if I took this plus this plus this plus this. So another way you can kind of see the table and notice the like little indentations that we're using the subcalculations that's really good practice to work on in Excel it looks kind of basic stuff but you want to be able to visualize these tables and format them in different ways you could also format them this way I'm going to try to say that I'm going to say that the dividends for the years Q1 Q2 Q3 and Q4 across the top and then we've got the dividends per share per quarter which we could just label across the top here and then we've got the total here the 185 which matches this 185 and then we could take the shares owned which is going to be the same amount all the way across because we didn't buy or sell any shares this method could account a little bit more easily than this method if we did buy or sell some shares right formatting this type of table and then we can multiply them out and now we get to see the dividends on a quarterly basis and of course these formulas are fairly easy to do in Excel and we can see the total calculation here as well and we can also kind of do a check figure hold on I'm going to say undo that undo that wait a second over here and the reason we can do that is because of course we can take the total that we did here the 1.85 times the 440 that would give us the 814 or we can add these up so we got the 145 plus the 145 plus 255 plus 268 about the rounded so they're a little short because we're rounded it should actually be closer to these the pennies involved but there you have it and then of course if we had a change in the shares we bought or sold some shares then we would have to sum them up this way I couldn't multiply them out this times this because we would have a different number of shares for Q1 Q2 and Q3 and Q4 for example you might also see it kind of in a vertical fashion you might see the same thing this is a little bit easier in some ways to do in Excel although the headers are a little bit more difficult so again really good practice just the simple kind of table problems to build the tables and see how they can be built what ways work for you and what are the most efficient ways so now we're going to be taking these numbers straight down it's a little bit more easy to copy the data this way than this way if you're using Excel and then you could take the number of shares which I could take this number and just copy it down you don't even need this column by the way we could just take the shares from over here and just use it as our baseline number because they're the same all the way across and then once again we can multiply across this way now so Q1 Q2 Q3 Q4 we can total them up on a vertical fashion which once again now we got the pennies involved 145.2 plus 145.2 plus 255.2 plus 268.4 there's the 114 and we can do it this way 1.85 times the 440 and you can double check your number if the shares would to change then you couldn't double check your number you'd have to do it Q1 Q2 Q3 and then add them up so just a couple ways to see that remember that when we're comparing to other companies we're usually looking at the dividends on a yearly basis because that's the basis that's kind of a standard comparison basis year over year types of comparison so if we're getting paid dividends quarterly we might try to annualize the dividends to do different kind of ratio analysis and compare them to other companies and we also might try to predict what's going to happen into the future in terms of dividend policy so we can make decisions based on that data at the margin going forward