Cost of Preferred Stock Calculator

About this calculator

Preferred stock sits between debt and common equity on a company's balance sheet, paying a fixed dividend the way a bond pays fixed interest, which is why its financing cost is calculated the same way a bond yield is: cost of preferred stock = annual dividend ÷ current market price per share, where the annual dividend itself comes from the par value multiplied by the stated dividend rate.

This calculator works through that chain — par value and dividend rate to annual dividend, then annual dividend divided by market price — to arrive at the cost of preferred equity. It's one of the components combined into a company's weighted average cost of capital (WACC), used by corporate finance professionals and analysts to evaluate whether issuing preferred stock is a cheaper or more expensive way to raise capital than debt or common equity.