Initial Dividend Rate Determination 

On the date the preference shares are issued, the Prime rate is recorded and multiplied by 87% to determine the initial dividend rate. This rate is used to calculate the first dividend payment.

 

Subsequent Dividend Rate Determination 

For each subsequent dividend payment, the current Prime rate on the dividend payment date is recorded and multiplied by 87% to determine the new dividend rate for that period.


Using the Dividend Rate to get the Monthly Dividend Income

Multiply the dividend rate by the amount invested to get the Annual Dividend Income. If dividends were payable annually, this would be the actual amount paid out at the end of the year. Because these dividends are paid monthly, the Annual Dividend Income amount must be divided by 12 to get the monthly dividend. Note that dividing by 12 results in an estimated amount and is a simplification of the actual formula, where instead the Annual Dividend Income is multiplied the fraction: days since last dividend/365 days. 


At the end of each month when a dividend is paid, the next dividend amount is calculated by using the Prime rate on that day. If the Prime rate stayed constant throughout the year, this calculation would be very straightforward and predictable, but because the Prime rate is subject to change, the resulting dividend rate will also change.


Example Calculation:

  • Current South African Prime Rate: 11.75%

  • Dividend Rate Formula: 87% of Prime

  • Number of shares: 10

  • Price per share: R1,000


Step 1: Calculate the Dividend Rate

  • Dividend Rate = 0.87 * Prime
  • Dividend Rate = 0.87 * 11.75%
  • Dividend Rate = 10.2225%


Step 2: Calculate the Total Investment Amount

  • Total Investment = Number of Shares * Price per Share
  • Total Investment = 10 shares * R1000
  • Total Investment = R10,000.00


Step 3: Calculate the Annual Dividend Income

  • Annual Dividend Income = Total Investment * Actual Dividend Rate
  • Annual Dividend Income = R10,000 * 10.2225%
  • Annual Dividend Income = R1022.25


Step 4: Calculate the Monthly Dividend Income

  • Estimate Income:

≈ Annual Dividend Income / 12

≈ R1022.25 / 12

≈ R85.19

  • Actual Income (for 31 days since the last dividend):

= Annual Dividend Income * (Days since last dividend / 365)

= R1022.25 * (31 / 365)

= R86.82


Summary

With a dividend rate of 10.2225%, if you buy 10 shares at R1,000 each, your total investment would be R10,000. You would receive approximately R1022.25 annually in dividends assuming the Prime rate stays constant at 11.75%. Therefore, your expected monthly dividend income would be approximately R85.19.