Enter the annual dividend and the current stock price into the calculator to determine the cost of the preferred stock.
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Cost of Preferred Stock Formula
The following equation is used to calculate the cost of a preferred stock.
CPS = DPS / PPS *100
- Where CPS is the cost of preferred stock (%)
- DPS is the dividends per share
- PPs is the current price per share ($)
Cost of Preferred Stock Definition
The cost of preferred stock is defined as the rate of return required by the holder of a company’s preferred stock.
Cost of Preferred Stock Example
How to calculate a cost of preferred stock?
- First, determine the dividends per share.
Calculate the dividends per share on an annual basis.
- Next, determine the current share price.
Calculate the current price per share.
- Finally, calculate the cost of preferred stock.
Calculate the percentage of return required on the preferred stock using the equation above.
A preferred stock is a type of stock holding of a company that has a priority claim over the company’s profits and net assets. That is the preferred stock is paid out first from profits