Preferred Stock Value Calculator
Value preferred stock as a perpetuity from its dividend and your required rate of return, and see the implied dividend yield.
How it works
Value = annual dividend ÷ required return · Annual dividend = par × dividend rate
Most preferred stock pays a fixed dividend forever and has no maturity, so it is valued as a perpetuity: the annual dividend divided by the return you require. When your required return is above the coupon rate the fair value falls below par; when it is below the coupon, the shares are worth a premium. Because the dividend is fixed, preferred shares behave much like long-duration bonds and fall in value as required returns (interest rates) rise.
Worked example
A $100 par preferred with a 6% dividend rate pays $6 a year. If you require an 8% return, its value is 6 ÷ 0.08 = $75 — a discount to par because the market demands more than the 6% coupon.
Frequently asked questions
Why value preferred stock as a perpetuity?
Traditional preferred shares pay a level dividend with no maturity date, so the cash flows form a perpetuity. Dividing the fixed dividend by the required return gives the present value of that endless stream.
What makes the value change?
The dividend is fixed, so value moves inversely with the required return. Rising market rates push required returns up and the price down; falling rates do the opposite — the same interest-rate sensitivity as bonds.
How is this different from common stock?
Common dividends can grow or be cut and are valued with a growth model. Preferred dividends are fixed and paid before common dividends, so the simple perpetuity formula applies.
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Educational estimate, not investment advice. Options and leveraged positions carry substantial risk.