How to use the dividend growth calculator
Project growth takes today’s dividend forward:
- Choose what to project. Use the dividend per share for a single stock, or your total yearly dividend income for a portfolio.
- Enter the current annual dividend: the regular payment times the number of payments a year, without special dividends.
- Enter a growth rate. The company’s own dividend CAGR over five or ten years is a reasonable starting point; the second tool calculates it. Test a lower rate too.
- Enter the number of years.
- Add your purchase price, or the amount invested for a portfolio, to see your yield on cost grow.
Dividend CAGR measures past growth. Enter the annual dividend at the start and the end of a period and the number of years between them.
The formulas
Cumulative dividends = D1 + D2 + … + Dn
Years to double = ln 2 ÷ ln(1 + g)
Yield on cost in year t = Dt ÷ Purchase priceD0 is today's annual dividend, g the yearly growth rate as a decimal and n the number of years. Cumulative dividends start with next year's payment.
A worked example
Projection. A stock pays $2 a share a year, and you expect it to grow 7% a year. In 10 years the dividend would be $3.93, and in 20 years it would reach $7.74, 3.87× today’s level. Over those years you would collect $87.73 a share.
You paid $50 a share, so your yield on cost rises from 4.00% today to 15.48% by the final year.
CAGR. The company paid $1.20 a share ten years ago and $2.36 last year. Its dividend CAGR is 7.00%, close to the rate used in the projection. At that pace the next annual dividend would be about $2.53.
How much the growth rate matters
Small differences in the growth rate compound into large differences in income. Starting from the same $2 dividend, over 20 years:
| Growth per year | Dividend in year 20 | Total dividends, years 1–20 |
|---|---|---|
| 0% | $2.00 | $40.00 |
| 3% | $3.61 | $55.35 |
| 7% | $7.74 | $87.73 |
| 10% | $13.45 | $126.00 |
A dividend that never grows still pays $40.00 over 20 years, but its buying power shrinks every year with inflation. Growth of a few percent a year roughly keeps pace with prices; faster growth is what builds real income.
High yield or high growth?
Income investors often choose between a stock with a high yield and slow growth, and one with a low yield and fast growth. Take $100,000 in each:
| Income today | Income in year 10 | Income in year 20 | Total over 20 years | |
|---|---|---|---|---|
| 5% yield, growing 2% a year | $5,000 | $6,095 | $7,430 | $123,917 |
| 2% yield, growing 10% a year | $2,000 | $5,187 | $13,455 | $126,005 |
The fast grower’s yearly income overtakes the high yielder’s in year 13, and by year 20 it has paid slightly more in total. Whether that trade is worth it depends on your horizon and on whether the fast growth actually lasts, which is the hard part: few companies sustain double-digit dividend growth for two decades.
Measuring dividend CAGR correctly
The CAGR is only as good as the two dividends you feed it.
- Use full-year totals. Add up the regular payments in each year. A single quarterly payment can be misleading if the company raises its dividend at a different time each year.
- Leave out special dividends. A one-off payment in the starting or ending year distorts the rate badly.
- Adjust for stock splits. After a 2-for-1 split the dividend per share halves. Use split-adjusted figures for both years.
- Check the path, not just the ends. The CAGR hides a cut in the middle of the period followed by a recovery. A company that raised its dividend every year is a different investment from one that cut and rebuilt it, even with the same CAGR. Long records of uninterrupted increases have their own labels: Dividend Aristocrats, for example, are S&P 500 members that have raised their dividend for at least 25 consecutive years.
- Compare periods. If the five-year CAGR is much lower than the ten-year figure, growth is slowing.
The simple average, total growth divided by the number of years, is shown for comparison. It overstates the yearly rate because it ignores compounding.
What this calculator does not include
- Uncertainty. The projection applies one growth rate to every year. Real dividends grow in steps, pause in recessions and are sometimes cut.
- Reinvestment. Dividends here are paid out, not used to buy more shares. Our dividend reinvestment calculator models reinvestment.
- Taxes and inflation. Figures are before tax and in nominal dollars.
- Payout limits. The calculator does not check whether earnings can support the projected dividend. Our payout ratio calculator helps with that.