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 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 ($)
To calculate the cost of preferred stock, divide the dividends per share by the current price per share, then multiply by 100.
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.
FAQ
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
