Dividend calculator

What a dividend calculator works out

A dividend is the share of profit a company pays to its shareholders in cash, usually as a fixed amount per share. The dividend yield expresses that amount as a percentage of the share price: a company paying $2 a year on a $50 share yields 4%. A dividend calculator turns those two numbers into money, then runs them forward in time.

Done properly, that needs more than one multiplication. The share count changes when dividends are reinvested or you add money each month. The dividend per share changes when the company raises or cuts it. The share price changes, which alters how many new shares each reinvested payment buys. And the payment schedule matters, because a quarterly payer hands you money to reinvest four times a year rather than once.

This calculator handles all of that month by month. Contributions buy shares at the start of each month, the price drifts at the growth rate you set, dividends are paid at the end of each payment period, tax (if you enter it) is taken off first, and the remainder is either reinvested at that day's price or kept as cash. The dividend per share steps up once a year by the dividend growth rate.

The formulas behind it

Each payment is:

Payment = shares held × (annual dividend per share ÷ payments per year) × (1 − tax rate)

With reinvestment switched on, the payment buys payment ÷ share price new shares, and the next payment is calculated on the larger holding. The dividend per share in year n is first-year dividend × (1 + dividend growth)n − 1, and the share price after t years is starting price × (1 + price growth)t.

Two derived figures are worth knowing:

• Yield on cost = annual dividend you receive now ÷ the money you put in. If you paid $10,000 and the holding now pays $1,818 a year, your yield on cost is 18.2%.
• Current yield = dividend per share now ÷ share price now. This is what a new buyer would earn, and it only rises over time if the dividend grows faster than the price.

If you only know the annual dividend per share, choose "Dividend per share" in the form and the calculator derives the yield from the share price. Many companies quote a quarterly figure: multiply it by four first.

A worked example (hypothetical)

Take a hypothetical $10,000 bought at $50 a share (200 shares), a 3.5% starting yield ($1.75 a share a year, paid quarterly), dividends growing 5% a year and the share price growing 4% a year, held for 20 years with no tax and no extra contributions. These are round illustrative numbers, not a forecast for any real company.

1. Year 1: 200 shares × $1.75 = about $350 of dividends.
2. With dividends reinvested, the holding grows to 421.60 shares worth $46,189 after 20 years. You receive $17,932.90 of dividends along the way, and $1,817.84 in year 20 alone. That is a yield on cost of 18.18%.
3. Taking the dividends as cash instead, you still hold 200 shares (worth about $21,911) plus $11,573.08 of cash, a total of $33,484.32, and year 20 pays $884.43.
4. Add a 15% dividend tax to the reinvesting case and the final value falls to $41,319.06, with $2,512.73 paid in tax.

The current yield in year 20 is 4.04% in every version, because the dividend grew slightly faster than the price. The gap between the reinvested and cash cases, about $12,700, is entirely compounding: the same company, the same payouts per share, more shares receiving them.

Which inputs move the result most

Changing one input at a time on the example above shows where the result really comes from. All figures are from the calculator, with everything else left as in the example.

• Payment frequency barely matters. Paid annually, the holding ends at $45,237.12; paid monthly, at $46,410.06. The annual dividend is identical, and monthly payments are simply reinvested a little sooner.
• Growth matters a lot. Set dividend growth and price growth both to 0% and the holding ends at $20,076.31, with $10,076.31 of dividends received. That flat case is worth running every time: it is what reinvesting the dividend alone does, with no help from a rising price or a rising payout.
• Regular contributions matter most. Adding $200 a month takes the total you put in to $58,000 and the final value to $161,703.12, paying $6,327.90 in year 20. Note the yield on cost falls to 10.91%, because most of the money went in later at higher prices. A lower yield on cost here is not a worse outcome.

The lesson is that the yield you start with sets the first year's income, but time, growth and the money you keep adding decide where you end up. None of the growth rates are knowable in advance, which is why it is worth looking at a range of cases rather than one.

How to use it, and the common mistakes

Do not chase the highest yield. A very high yield often means the share price has fallen because the market expects the dividend to be cut. A 10% yield that halves next year is worth less than a 3% yield that holds. The calculator assumes your dividend is paid every period; reality does not promise that.

Be modest with growth rates. A dividend that grew 10% a year for a decade can stop growing. Run a pessimistic case (0% dividend growth, 0% price growth) alongside your central one. If the plan only works in the optimistic version, it is fragile.

Remember tax and fees. Many countries withhold tax on dividends, sometimes at a different rate for foreign shares, and tax-sheltered accounts change the picture completely. A flat rate is a rough approximation: check the rules where you live.

Yield on cost is not a return. It is a comfortable number because it rises, but it ignores what the holding is worth today. Judge an investment on total return (price change plus dividends), which the final value captures. To compare two investments over different periods, the CAGR calculator gives each a single annual rate.

Finally, the price and dividend you enter are yours to set: nothing here is live market data, and nothing here is a recommendation to buy any share.

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