Preferred Stock Valuation Calculator
A fixed-rate preferred share pays a constant dividend with no maturity, so it is valued as a perpetuity: price equals the annual dividend divided by your required rate of return. This calculator computes the dividend from par value and dividend rate, then values the share. If the dividend grows at a constant rate, it applies the Gordon growth model instead. Enter the par value, dividend rate, required return, and any constant growth rate. The required return must exceed the growth rate for the growing-dividend case to give a finite value.
Preferred stock formula
Dividend = par value * dividend rate
Fixed dividend: value = dividend / required return
Growing dividend: value = dividend / (required return - growth)
Dividend yield at value = dividend / value
With zero growth, the value is the simple perpetuity. With constant growth, the Gordon growth model applies, and the required return must be greater than the growth rate.
Preferred stock context
- Preferred dividends rank ahead of common dividends.
- Most traditional preferred shares pay a fixed dividend with no maturity.
- A higher required return lowers the present value of the dividend stream.
- The growing model requires the required return to exceed the growth rate.
- Callable or convertible features can change the realistic value.
Preferred stock valuation: frequently asked questions
How is preferred stock valued?
A standard fixed-rate preferred share is valued as a perpetuity: its price equals the annual dividend divided by the required rate of return. Because the dividend is fixed and has no maturity, the present value of the infinite dividend stream simplifies to this single ratio.
How is the dividend found?
The annual dividend equals the par value (also called face or stated value) times the preferred dividend rate. For example, a 100 dollar par share with a 6 percent rate pays 6 dollars per year. You can also enter the dividend directly if you prefer.
What if the dividend grows?
If the preferred dividend grows at a constant rate, the value follows the Gordon growth model: dividend divided by (required return minus growth rate). The required return must be greater than the growth rate, or the model does not produce a finite value.
What required return should I use?
Use the rate of return you require to hold the share, reflecting its risk relative to alternatives. A higher required return lowers the value; a lower required return raises it. This is an editable input so you can test different assumptions.
Does a higher dividend always mean higher value?
Holding the required return constant, a higher dividend gives a higher value. But the required return reflects risk, so a share offering a very high dividend may carry higher risk, which would raise the required return and offset the value.
Official sources
- U.S. Securities and Exchange Commission: Investor.gov.
- U.S. Securities and Exchange Commission: SEC.gov.
Reviewed by the CalculatorHub team, edited by James Graham, 17 June 2026. See our methodology.