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Cumulative Preference Dividends - Calculated off what?

  • 03-11-2013 10:04PM
    #1
    Bubbaclaus
    Registered Users, Registered Users 2 Posts: 4,461 ✭✭✭


    Hi Guys

    I was wondering if someone could help me.

    If a venture capitalist wanted to invested in a business and the deal included (among other things) a 5% cumulative preference dividend, what would the 5% be calculated off?

    A quick search tells me that a cumulative preference dividend is "A sum that publicly traded companies must remit to preferred shareholders without regard to the company's earnings or profitability.", which makes me pretty certain it isn't calculated off the profit.

    Is it 5% of the initial investment paid back as a dividend every year?

    Thanks in advance!


Comments

  • #2
    strmin
    Registered Users, Registered Users 2 Posts: 316 ✭✭strmin


    Bubbaclaus wrote: »

    Is it 5% of the initial investment paid back as a dividend every year?

    Not exactly. 5% dividend based on initial preference share offering. If you buy shares with premium, you get less than 5%, and if you buy shares with discount you get more than 5%. Same as bonds really.


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