Valuation of Preferred Stock
Addressing whether the timing of dividend payments affects market prices in preferred stock valuation, this article uses a case with an annual dividend of $5 and a required rate of return of 10% to analyze price changes at two points: before dividend maturity and after payment, and provides conclusions based on the perpetuity model.
What is the impact on the market price of preferred stock if the dividend payment is due and when it is paid? Suppose a company pays $5 as dividend every year 1- What is the market price now when the next dividend payment is due in one year? 2- What will impact on the market price of stock immediately after the next dividend is paid. Let's assume a 10% required rate of return for both cases. I believe there shouldn't be any impact on pricing because it is a simple case of perpetuity.