How to Use the Preferred vs Common Stock Return Calculator
Choosing between preferred and common stock of the same company involves a trade-off: preferred offers higher current income (dividend yield) while common offers greater capital appreciation potential.
Enter the current price and annual dividend for both share classes, plus your expected annual price growth for common stock. The calculator shows total return over 1, 3, and 5 years for each type.
How Returns Are Calculated
Capital gain = Price ร (1 + growth%)^n โ Price. Dividend income = Annual dividend ร n. Total ROI = (Capital gain + Dividends) รท Purchase price ร 100. Preferred stock growth is estimated at 80% of common stock growth.
Note
This calculator excludes taxes, transaction costs, and dividend reinvestment. Use it to compare scenarios โ not as a precise forecast.
Frequently Asked Questions
Preferred stocks can appreciate, but their price movement is often more muted than common stock. They're closer in behavior to bonds โ their price is driven largely by interest rates and dividend yield expectations.
Not guaranteed, but they have priority over common dividends. If a company cuts dividends, preferred shareholders are affected after bondholders but before common stockholders.
Cumulative preferred stock means unpaid dividends accumulate and must be paid before common stockholders can receive any dividends. This provides stronger income protection than non-cumulative preferred.