Calculate the yield of preferred stock from its annual dividend and market price, and solve for the price or dividend you need.
Preferred Stock Yield Formula
Yield (%) = (D / P) * 100
Where:
D is the annual dividend paid per preferred share in dollars.
P is the current market price per preferred share in dollars.
This current dividend yield measures annual dividend income relative to the current market price. It excludes price gains or losses, call or redemption proceeds, fees and taxes, so it is not total return or yield to maturity.
When you know the issue’s dividend calculation value and stated annual dividend rate, find the annual dividend first:
D = V * r
V is the per-share value specified as the dividend base in the issue terms (often stated value or liquidation preference), and r is the annual rate as a decimal. That base can differ from nominal legal par value. For quarterly dividends, multiply the payment by four only when the same payment rate is assumed for the year.
Sample Yields by Price and Dividend
The table below shows the yield for several combinations of annual dividend and market price so you can see how a rising price lowers the yield.
| Annual Dividend (D) | Market Price (P) | Yield |
|---|---|---|
| $5.00 | $100.00 | 5.00% |
| $5.00 | $90.00 | 5.56% |
| $5.00 | $110.00 | 4.55% |
| $1.50 | $24.00 | 6.25% |
| $6.00 | $95.00 | 6.32% |
Example Problems
Example 1. A preferred share pays an annual dividend of $4.50 and trades at $90. The yield is (4.50 / 90) * 100 = 5.00%.
Example 2. A $100 par preferred share has a 6% annual dividend rate, so D = 100 * 0.06 = $6.00. At a market price of $95, the yield is (6.00 / 95) * 100 = 6.32%.
FAQ
What is preferred stock yield?
It is the annual dividend per share divided by the current market price per share, shown as a percent. It measures the income return you get at the price you pay.
Does preferred stock have a yield to maturity?
Perpetual preferred stock has no maturity date. A callable issue can have a yield to call based on a specified call date, call price and dividends. An issue with a stated maturity can have a yield to maturity based on its maturity date, redemption value and dividends. Those cash-flow yields differ from current dividend yield and are not calculated here.
How is the yield different from the dividend rate?
The stated dividend rate is applied to the issue’s contractual dividend base; some issues have floating or reset rates. Current dividend yield instead divides annual dividend by current market price, so it can differ from the stated rate.
