Final answer:
The correct formula to calculate cash paid for dividends is beginning dividends payable minus ending dividends payable plus dividends declared. This calculation shows the cash impact of dividend transactions during a given year. Historical trends for the S&P 500 index indicate a shift from higher dividend yields to greater capital gains.
Step-by-step explanation:
The amount of cash paid for dividends for the current year can be calculated by the formula: beginning dividends payable minus ending dividends payable plus dividends declared. This formula reflects the cash flow activities related to dividends within the reporting period. You should first take the amount of dividends payable at the beginning of the year, subtract the amount of dividends payable at the end of the year, and then add the total dividends that were declared during the year to find the actual cash paid out for dividends. This calculation is useful for financial analysis and understanding how much a company has paid out to its shareholders in the form of dividends.
When analyzing the performance of the S&P 500 index through history, one can observe how dividend yields have changed over time. Traditionally, dividends were a substantial part of the total return, around 4% annually from the 1950s to the 1980s, but have since decreased to approximately 1% to 2% since the 1990s. Meanwhile, capital gains have come to represent a larger portion of the total returns, particularly during the 1980s and 1990s.