Morris Corporation had the following stock outstanding from 2010 through 2013:
Preferred stock: $100 par value, 8 percent cumulative, 5,000 shares authorized, issued, and outstanding
Common stock: $10 par value, 100,000 shares authorized, issued, and outstanding
The company paid $30,000, $30,000, $94,000, and $130,000 in dividends during 2010, 2011, 2012, and 2013, respectively. The market price per common share was $7.25 and $8.00 per share at the end of 2012 and 2013, respectively.
1. Determine the dividends per share and the total dividends paid to common stock-holders and preferred stockholders in 2010, 2011, 2012, and 2013.
2. Perform the same computations, with the assumption that the preferred stock was noncumulative.
3. Calculate the 2012 and 2013 dividends yield for common stock using the dividends per share computed in 2.
4. How are cumulative preferred stock and noncumulative preferred stock similar to long-term bonds? How do they differ from long-term bonds?