Understanding Dividends on Cash Flow Statements: A Guide

A company pays dividends to common stockholders as a distribution of its earnings, which can add to stockholders' returns. Although a company pays dividends from earnings on its income statement, a company shows the amount of cash dividends it paid during an accounting period on its cash flow statement. The cash flow statement shows a company's cash inflows and outflows during an accounting period. Dividends on the cash flow statement represent a cash outflow from financing activities. You can find the amount of dividends a company pays out to determine how much you receive as a shareholder.

Step 1

Find the "Cash Flows From Financing Activities" section on the cash flow statement, which lists cash inflows and outflows related to the company's stock and debt financing.

Step 2

Identify the "Payment of Cash Dividend" line item in the section, and find the dollar amount listed next to it. The cash flow statement shows the dollar amount in parentheses because it is a cash outflow, which is money the company paid out. This dollar amount is the total amount of cash dividends the company paid to common stockholders during the accounting period. For example, if the cash flow statement shows "Payment of Cash Dividend ($10,000)," the company paid $10,000 in cash dividends during the accounting period.

Step 3

Find the number of shares of the company's common stock outstanding on any financial website that provides stock quotes.

Step 4

Divide the amount of cash dividends paid during the period from the cash flow statement by the number of shares outstanding to calculate the amount of cash dividends paid per share of common stock. For example, if the company has 5,000 shares of stock outstanding, divide $10,000 by 5,000 to get $2 in cash dividends paid per share of common stock.

Tip

Monitor the amount of dividends a company pays over different accounting periods. Increasing dividends over time suggests a company has strong finances and is less likely to suffer a lack of resources.