How to Calculate Value of a Share of Preferred Stock

By Business & Finance Last updated Thursday, May/09/2024

1). Gather the necessary information. You will need to know the stock's par value, preferred dividend rate and required rate of return. The par value is the amount of money that the investor contributed at the time the shares were issued. The preferred dividend rate is the amount of money payed out to the shareholder at regular intervals and usually represents a fixed percentage of the par value.
2). Multiply the par value by the dividend rate. For example, if you had preferred stock with a $50 par value and a dividend rate of 9 percent, you would multiply 50 by 0.09 to get 4.5.
3). Divide the result by the required rate of return. The resulting quotient is the value of the preferred stock. Continuing with our example from step two and assuming that the required rate of return was 10 percent, we would divide 4.5 by 0.10 to get a final value of $45.

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