General dividend discount models are relatively easy to apply to preferred shares. In its simplest form, preferred stock is a form of equity (generally, non-voting) that has priority over common stock in the receipt of dividends and on the issuer’s assets in the event of a company’s liquidation. It may have a stated maturity date at which time payment of the stock’s par (face) value is made or it may be perpetual with no maturity date; additionally, it may be callable or convertible.
For a non-callable, non-convertible perpetual preferred share paying a level dividend D and assuming a constant required rate of return over time,
For a non-callable, non-convertible preferred stock with maturity at time n, the estimated intrinsic value
