Viewing preferred dividends as paid in perpetuity, the cost of preferred stock can be calculated as dividends per share of preferred stock divided by the market value of the preferred stock.

Question

Quizplus · Accepted Answer

This formula is known as the dividend yield formula and provides an estimate of the rate of return an investor can expect from the preferred stock.

Viewing Preferred Dividends as Paid in Perpetuity, the Cost of Preferred