Transparent method
The formula
Worked example
Example inputs
How to interpret the result
Dividend growth projects income, not price, which makes it a way to see what a holding might pay you later. Five hundred shares paying $2 each give $1,000 a year now, and at 5 percent annual growth that becomes about $1,629 after ten years, with about $12,578 collected in total. The model holds the share count fixed and assumes the company keeps raising its payment, which real firms do not do every year.
Before you rely on it
What to check
Look at how the company's earnings and payout ratio have moved, since a dividend can only grow as fast as earnings support it. A payout that already takes most of earnings has little room.
The common error
Where people go wrong with dividend growth calculator
Treating a constant growth rate as a forecast. A cut or a freeze changes every later year, so test a scenario with no growth and one with a cut.
Sensitivity evidence
How shares owned changes the future annual dividend income
| Shares owned | Future annual dividend income | Cumulative dividends (simple) |
|---|---|---|
| 400 | $1,303 | $10,062 |
| 450 | $1,466 | $11,320 |
| 500worked example | $1,629 | $12,578 |
| 550 | $1,792 | $13,836 |
| 600 | $1,955 | $15,093 |
Every input, tested
Which input moves the future annual dividend income most
| Input | Tested from | To | Future annual dividend income at each end | Swing |
|---|---|---|---|---|
| Years | 7.0 years | 13.0 years | $1,407 to $1,886 | $479 (29%) |
| Shares owned | 450 | 550 | $1,466 to $1,792 | $326 (20%) |
| Annual dividend per share | $1.80 | $2.20 | $1,466 to $1,792 | $326 (20%) |
| Annual dividend growth | 4.0% | 6.0% | $1,480 to $1,791 | $311 (19%) |
Two variables at once
Future annual dividend income by shares owned and annual dividend per share
| Shares owned \ Annual dividend per share | $1.60 | $2.00 | $2.40 |
|---|---|---|---|
| 400 | $1,042 | $1,303 | $1,564 |
| 450 | $1,173 | $1,466 | $1,759 |
| 500 | $1,303 | $1,629 | $1,955 |
| 550 | $1,433 | $1,792 | $2,150 |
| 600 | $1,564 | $1,955 | $2,346 |
Step by step
The worked example, input by input
| Input | Value used |
|---|---|
| Shares owned | 500 |
| Annual dividend per share | $2.00 |
| Annual dividend growth | 5.0% |
| Years | 10.0 years |
| Future annual dividend income | $1,629 |
| Cumulative dividends (simple) | $12,578 |
Complete evidence
Full projection schedule
Show all 10 rows
| Period | Opening balance | Contribution | Growth | Ending balance |
|---|---|---|---|---|
| Year 1 | $0.00 | $0.00 | $0.00 | $0.00 |
| Year 2 | $0.00 | $0.00 | $0.00 | $0.00 |
| Year 3 | $0.00 | $0.00 | $0.00 | $0.00 |
| Year 4 | $0.00 | $0.00 | $0.00 | $0.00 |
| Year 5 | $0.00 | $0.00 | $0.00 | $0.00 |
| Year 6 | $0.00 | $0.00 | $0.00 | $0.00 |
| Year 7 | $0.00 | $0.00 | $0.00 | $0.00 |
| Year 8 | $0.00 | $0.00 | $0.00 | $0.00 |
| Year 9 | $0.00 | $0.00 | $0.00 | $0.00 |
| Year 10 | $0.00 | $0.00 | $0.00 | $0.00 |
Where the inputs come from
Shares owned and the annual dividend per share come from your brokerage statement or the company's latest declaration. Annual dividend growth is your assumption for how fast the payment rises; look at the company's own record over five and ten years instead of guessing, and be conservative. Years is the projection length. If the company has cut its dividend in the past, treat a high growth rate skeptically.
When the result stops applying
It assumes the growth rate is steady and the company never cuts the dividend, while real dividends can stall or fall in recessions. The result is before tax and does not include any reinvestment. Share price may fall even while dividends rise. The cumulative figure is a simple sum, not an investment return.
What to compare it with
Check current sustainability with the dividend payout ratio calculator, and the starting yield with the dividend yield calculator. The dividend reinvestment calculator shows what happens if you put the income back into shares, and the compound interest calculator handles a general growth case.
People also ask
Frequently asked questions
What dividend growth rate is realistic?
Mature companies often raise payouts in line with earnings growth, commonly in the low to mid single digits per year. Anything above 10% for many years is rare.
Does dividend growth beat a high starting yield?
Sometimes, over long periods. A lower yield growing at 7% can overtake a higher flat yield in roughly a decade or two, but growth is uncertain and the higher yield pays sooner.
What is yield on cost?
It is today's dividend divided by the price you originally paid, and it rises as the dividend grows, even though the current yield on today's price does not.