Dividend Calculator

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Dividend Calculator

Work out the dividend yield and income from a holding, see what reinvesting the dividends does over the years, or find the investment needed for the dividend income you want. Add a tax rate to see the income after tax.

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Dividend income

If the price moves

Dividend yield = annual dividend per share ÷ share price. Annual dividend = dividend a payment × payments a year. Income = shares × annual dividend. Yield on cost = annual dividend ÷ price paid. Payout ratio = annual dividend ÷ earnings per share. Investment needed = yearly income ÷ yield. Each reinvested dividend buys shares at that year’s price, and the price and dividend step up once a year. The CSV, image and printed report contain the values you entered, nothing preloaded.

How to use this tool

Choose what to calculate. "Yield and income from a holding" takes the share price, the dividend for one payment, the payments a year, and either the number of shares or the amount invested. Optional boxes add the yield on cost from the price you paid and the payout ratio from earnings per share. "Growth with dividends reinvested" adds a starting amount, growth rates for the dividend and the price, optional contributions and the years. "Income target" finds the investment needed for an income at a yield, or the yield needed on an amount you have. The tax box works in every mode.

The input people most often get wrong is the dividend. The box wants the dividend for one payment, not the year: $0.50 every quarter is $2.00 a year, and typing $2.00 with four payments makes the yield four times too high. The tool stops you when the yearly dividends exceed the price. Growth and tax rates are percentages, so type 5 for 5%.

What the calculation is doing

The annual dividend is the dividend for one payment times the payments a year, and the yield is that divided by the share price. Income is shares times the annual dividend. The monthly figure is the yearly income divided by 12, an average because a quarterly payer pays nothing in two months out of three. Yield on cost divides by the price you paid, and the payout ratio divides the annual dividend a share by earnings a share.

Reinvestment runs year by year. The price and the dividend each step up once a year by the growth rates you enter. Every payment buys shares at that year's price using the dividend after tax, and contributions buy shares at the end of each month or year. Taking cash leaves the share count alone and keeps the dividends as cash earning nothing. Buying at the price set for the year slightly favours reinvesting when prices rise: at these defaults it gives 2.4% more after 20 years than a price that climbs month by month.

The income target turns the yield formula round: the investment needed is the yearly income divided by the yield. To keep a target after tax, divide by one minus the tax rate.

Bar chart for $10,000 at a 4% yield with the price and dividend growing 5% a year: after 10, 20 and 30 years dividends reinvested give $24,252, $58,816 and $142,641 against $21,320, $39,759 and $69,795 with dividends taken as cash, and the shares owned grow from 200 to 297.8, 443.3 and 660.1; beside it, lines of yield on cost over 30 years for dividend growth of 0%, 3%, 5% and 7% ending at 4%, 9.4%, 16.5% and 28.5%
The gap between reinvesting and taking cash widens faster each decade because the extra shares pay dividends of their own, while yield on cost climbs only because the dividend grew, not because a new buyer earns more.

Why a high yield can be a warning

Investor.gov defines a dividend as a portion of a company's profit paid to shareholders. FINRA states that a company may pay dividends but does not have to, that the amount is not guaranteed, and that it can cut the dividend or eliminate it. The Ontario Securities Commission's GetSmarterAboutMoney.ca agrees: a company may delay, reduce or eliminate dividends at any time.

Yield is the dividend divided by the price, so it can rise for two different reasons: the dividend goes up, or the price goes down. FINRA notes that typically, when a price falls, its yield rises. The default share pays $2.00 a year on $50, a yield of 4%. If the price halves to $25 and the dividend stays put, the yield doubles to 8%, yet the holding worth $10,000 is now worth $5,000. The price table under the calculator shows this row by row.

If the company then halves the dividend, the yield falls back to 4% on the new price and the income has halved. So an unusually high yield deserves a question rather than applause: why is the price where it is, and can the dividend be paid from earnings? No yield is safe or unsafe on its own, and the tool names no threshold.

Payout ratio, reinvestment and yield on cost

The payout ratio is the share of earnings paid out as dividends, dividends divided by earnings in Aswath Damodaran's NYU Stern notes. A $2.40 dividend on earnings of $4.00 a share is 60%, leaving 40% in the company. Above 100% the company pays out more than it earned, and the gap comes from cash on hand or borrowing. One weak year can distort the ratio, so look at several years. With zero or negative earnings it is not defined.

Investor.gov says that instead of receiving cash dividends you may buy more of a company's stock by having the dividends reinvested, and to check whether you will be charged for the service. Each payment buys shares, and those shares pay dividends at the next payment. At the defaults, $10,000 buys 200 shares. After 20 years with dividends reinvested there are 443.3 shares worth $58,816. Taking cash leaves 200 shares worth $26,533 plus $13,226 of cash, $39,759 in all.

The benefit grows with time: the difference is $2,932 after 10 years, $19,057 after 20 and $72,846 after 30. It also needs growth to continue. With no growth in price or dividend the same $10,000 reaches $22,167 after 20 years, and at 2% growth $32,939.

Yield on cost divides today's dividend by the price you originally paid, which flatters an old purchase. A share bought at $50 that pays $2.00 yields 4% on cost. After 20 years of 5% dividend growth it pays $5.0539, a yield on cost of 10.108%, but the price has grown too, so a new buyer at $126.35 still gets 4%. It describes the past purchase, not what your money earns against the alternatives today.

Dividend taxes, and why the rate is an editable box

Tax treatment differs by country and by type of dividend, and rates change, so the calculator has no built in tax table. The IRS says ordinary dividends are included in ordinary income, while qualified dividends qualify for lower capital gain rates. The CRA separates eligible dividends from other than eligible dividends from taxable Canadian corporations, and a federal dividend tax credit can apply. Your effective rate depends on the kind you receive, your other income and the type of account.

Enter the rate that applies to you, or leave the box empty. The tool takes the tax out of each dividend and reinvests the rest: at a 15% rate the default holding is worth $52,223 after 20 years instead of $58,816. Reinvested dividends are still taxable in the year they are paid, as GetSmarterAboutMoney.ca says, whether they arrive as cash or are reinvested for you. Tax on a later sale of the shares is not included.

Investment needed for a monthly dividend income

Investment needed is twelve times the monthly income divided by the yield. The table uses the same formula as the calculator, and its yields are for comparison, not a statement of what any investment pays today.

Monthly income2% yield3% yield4% yield5% yield6% yield
$100 a month$60,000$40,000$30,000$24,000$20,000
$250 a month$150,000$100,000$75,000$60,000$50,000
$500 a month$300,000$200,000$150,000$120,000$100,000
$1,000 a month$600,000$400,000$300,000$240,000$200,000
$1,500 a month$900,000$600,000$450,000$360,000$300,000
$2,000 a month$1,200,000$800,000$600,000$480,000$400,000
$2,500 a month$1,500,000$1,000,000$750,000$600,000$500,000
$3,000 a month$1,800,000$1,200,000$900,000$720,000$600,000
$4,000 a month$2,400,000$1,600,000$1,200,000$960,000$800,000
$5,000 a month$3,000,000$2,000,000$1,500,000$1,200,000$1,000,000

Read across a row: $1,000 a month takes $400,000 at 3%, $300,000 at 4%, $240,000 at 5% and $200,000 at 6%. A higher yield needs less money, but a yield that is high because the price fell may not last, so the smaller amount is not a saving.

A worked example you can check on paper

Yield and income with the defaults, a $50 share paying $0.50 a quarter and 200 shares. The annual dividend is 0.50 × 4 = $2.00 a share and the yield is 2.00 ÷ 50 = 4%. Income is 200 × 2.00 = $400 a year, $100 a quarter or 400 ÷ 12 = $33.33 a month. The amount invested is 200 × 50 = $10,000, and 400 ÷ 10,000 is the same 4%.

One year of reinvesting $10,000 in the same share: 200 shares receive $100, which buys 2 shares at $50. Then 202 shares receive $101, buying 2.02; 204.02 shares receive $102.01, buying 2.0402; 206.0602 shares receive $103.03, buying 2.0606. The year ends with 208.1208 shares and $406.04 of income. The price steps up 5% to $52.50, so the holding is worth 208.1208 × 52.50 = $10,926.

Income target: $1,000 a month is $12,000 a year, and at a 4% yield 12,000 ÷ 0.04 = $300,000. Check: 300,000 × 0.04 = $12,000. To keep it after 15% tax, 12,000 ÷ (0.04 × 0.85) = $352,941.

Mistakes that catch people out

Entering the yearly dividend as one payment. The box wants a single payment: four payments of $2.00 is $8.00 a year.

Choosing by yield alone. A high yield can come from a falling price or a dividend the company cannot afford, so check the payout ratio and the dividend history.

Reading yield on cost as a return today. It divides today's dividend by an old price; a new decision depends on the yield on the current price.

Forgetting tax on reinvested dividends. A dividend that buys shares automatically is still income that year, and no cash arrives to pay the tax.

Treating a projection as a forecast. Constant growth is an assumption: prices fall, and dividends can be cut. Try lower rates and zero growth.

Popular calculations

Each opens the calculator with those values filled in, and they can be changed once it is open. The yield examples use a $100 share so the yield is easy to read. The reinvestment examples use a $50 share paying $0.50 a quarter, with the same growth rate for the price and the dividend.

Yield and income on typical investments

2% yield on $10,000: $200 a year3% yield on $10,000: $300 a year4% yield on $10,000: $400 a year5% yield on $10,000: $500 a year6% yield on $10,000: $600 a year3% yield on $50,000: $1,500 a year5% yield on $50,000: $2,500 a year4% yield on $100,000: $4,000 a year6% yield on $100,000: $6,000 a year

After tax, yield on cost and payout ratio

4% yield on $100,000 after 15% tax: $3,400 a year5% yield on $50,000 after 20% tax: $2,000 a yearYield 4%, on cost 8%, payout ratio 60%: $240 a year7% yield, payout ratio 112%: earnings do not cover it$0.15 a month on a $40 share: 4.5% yield, $450 a year

Income target and yield needed

$500 a month at a 3% yield needs $200,000$500 a month at a 4% yield needs $150,000$500 a month at a 5% yield needs $120,000$1,000 a month at a 3% yield needs $400,000$1,000 a month at a 4% yield needs $300,000$1,000 a month at a 5% yield needs $240,000$1,000 a month on $250,000 needs a 4.8% yield$500 a month on $150,000 needs a 4% yield

Reinvesting dividends for 10, 20 and 30 years

$10,000 for 10 years at 3% growth: $20,009$10,000 for 10 years at 5% growth: $24,252$10,000 for 10 years at 7% growth: $29,288$10,000 for 20 years at 3% growth: $40,036$10,000 for 20 years at 5% growth: $58,816$10,000 for 20 years at 7% growth: $85,780$10,000 for 30 years at 3% growth: $80,109$10,000 for 30 years at 5% growth: $142,641$10,000 for 30 years at 7% growth: $251,234$10,000 plus $500 a month for 20 years at 5% growth: $398,071

How this was checked

Definitions come from published sources: FINRA and OpenStax give yield as the yearly dividend divided by the price, Damodaran of NYU Stern gives the payout ratio as dividends divided by earnings, and Investor.gov defines a dividend and describes reinvestment plans. Two textbook examples were reproduced. OpenStax Contemporary Mathematics has 150 shares paying $0.87 a quarter, which the engine returns as $130.50 a payment and $522 a year. OpenStax Principles of Finance has a $5.00 dividend growing 4% a year, which the engine steps to $5.20; its value of $5.20 ÷ (0.08 − 0.04) = $130 was confirmed by summing 3,000 discounted dividends.

The reinvestment engine was compared with a year by year closed form, using an annuity formula for shares within each year, for annual, semiannual, quarterly and monthly payments, monthly and yearly contributions, and tax. Across 4,000 random cases the largest relative difference was 3.5 parts in 10 trillion. A second route tracking dollars instead of shares agreed to better than one part in 100 trillion, and a single closed form for equal price and dividend growth matched 3,000 random cases within 2 parts in 10 trillion. The default equals 10,000 × 1.01 to the power 80 × 1.05 to the power 20 = $58,816.

For every monthly income from $100 to $5,000 and every yield from 2% to 6% in the table, the smallest investment found by search matched the formula to the cent. Stepping up in $100 amounts gave $150,000 for $500 a month at 4% and $300,000 for $1,000. About 27,000 combinations with zero prices, shares, dividends, growth and tax up to 100% produced no undefined values.

Every address in the lists above was opened and checked for a distinct title, the right answer, a chart that renders, and clean CSV, image and print output containing only the values entered, at desktop, tablet and phone widths.

Common questions

What is dividend yield and how is it calculated?

Dividend yield is the annual dividend per share divided by the share price, as a percentage. FINRA describes it as the yearly dividend rate divided by the current price. A share paying $0.50 every quarter pays $2.00 a year, so at $50 the yield is 2 ÷ 50 = 4%. It changes whenever the price or the dividend changes.

Is a high dividend yield good?

Not by itself. Because yield is the dividend divided by the price, a share whose price has fallen shows a higher yield although nothing improved for the holder. FINRA notes that a falling price typically raises the yield and that a company can cut or eliminate its dividend. Check the payout ratio and the dividend history first.

What is a payout ratio?

The share of earnings paid out as dividends: the annual dividend per share divided by earnings per share. A $2.40 dividend on earnings of $4.00 is 60%. Above 100% the company pays out more than it earned, so the difference comes from cash on hand or borrowing.

Does reinvesting dividends always beat taking cash?

Only in the arithmetic of a steady projection. Reinvesting buys more of the same company, which grows the holding faster if the price and dividend hold up, but it concentrates the money, and the dividends are taxable when paid, seen or not. If the price falls, the extra shares fall too.

How much do I need to invest to earn $1,000 a month in dividends?

Divide the yearly income by the yield. $1,000 a month is $12,000 a year, which takes $400,000 at 3%, $300,000 at 4% and $240,000 at 5%. To keep $1,000 a month after 15% tax at 4% takes $352,941. The yields are examples, not what any investment pays.

Are dividends taxed the same way everywhere?

No. The IRS separates ordinary dividends, taxed as ordinary income, from qualified dividends, which qualify for lower capital gain rates. The CRA separates eligible from other than eligible dividends from Canadian corporations, with a dividend tax credit. Rules and rates differ by country and change, so the tool asks for your own rate.

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