Enter the annual dividend and the current stock price into the calculator to determine the cost of the preferred stock.

Cost of Preferred Stock Formula

The following equation is used to calculate the cost of 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?

  1. First, determine the dividends per share.

    Calculate the dividends per share on an annual basis.

  2. Next, determine the current share price.

    Calculate the current price per share.

  3. Finally, calculate the cost of preferred stock.

    Calculate the percentage of return required on the preferred stock using the equation above.

FAQ

What is a preferred stock?

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

cost of preferred stock calculator
cost of preferred stock formula