Cost of Preferred Shares

The cost of preferred shares is the dividend expected by holders of a company’s preferred stock. It represents the return that investors require for investing in the company’s preferred shares.

Calculation

$$r_{ps}=\frac{D_{ps}}{P_{ps}}$$

Where:

• $D_{ps}$ = Annual preferred dividend
• $P_{ps}$ = Market price of preferred shares
• $r_{ps}$ = Cost of preferred shares