Dividends are after-tax cash payments to shareholders. The retained-earnings account in the stockholders' equity section of the balance sheet holds the accumulated profits, minus dividend payments. The statement of cash flow shows a company's cash flows from operating, investing and financing activities. You will need the financial statements of two consecutive periods to calculate dividends, retained earnings and cash flow.
Get the press release that announces the dividend payment, which should be in the investor relations section of a company's website. The announcement usually includes the per-share dividend amount and the payment date.
Obtain the number of shares outstanding from the shareholders' equity section of the balance sheet. There is usually a note below the common stock line indicating the number of shares outstanding. If the company has preferred stock outstanding, calculate the preferred dividends separately because the common and preferred dividend amounts are usually not the same.
Calculate the product of the per-share dividend and the outstanding share count. For example, if the outstanding share count is 1 million and the company announces dividends of 25 cents a share, dividend payments equal $250,000 (1 million x 25 cents). However, note that the company pays the dividend on the payment date, which is usually a few weeks after the dividend announcement.
Retained EarningsStep 1
Get the beginning retained earnings balance, which is the ending balance of the previous period.
Add the net income of the current period to the beginning retained earnings balance. The net income is equal to sales minus the sum of cost of goods sold, operating expenses, interest expenses and taxes. It is usually the bottom line of a company's income statement.
Subtract the dividend payments from the result to get the ending retained-earnings balance. For example, if the beginning retained earnings balance is $100,000, net income is $50,000 and dividend payments are $25,000, the ending retained-earnings balance is $125,000 ($100,000 + $50,000 - $25,000). Companies may prepare a separate statement of retained earnings to show the derivation of the ending retained-earnings balance.
Statement of Cash FlowStep 1
Get the beginning cash balance, which is the ending cash balance on the previous statement of cash flow.
Determine the cash flow from operating activities. Start with the net income for the period, and then adjust for noncash transactions and changes in working capital. Noncash transactions include depreciation expenses and credit sales and purchases. Working capital is the difference between current assets, such as inventory and accounts receivable, and current liabilities, such as accounts payable and interest payable.
Find the cash flow from investing and financing activities. Investing activities include investments in other companies and sales or acquisitions of fixed assets, such as buildings and equipment. Financing activities include transactions with creditors and investors, such as stock and bond issues, loan proceeds and repayments, and dividend payments to shareholders.
Add the cash flows from operating, investing and financing activities to calculate the net cash flow for the period. Then, add the net cash flow to the beginning cash balance to calculate the ending cash balance.