Dividend Calculator

How it works

The calculator starts with annual dividend income, then grows that income by the annual dividend growth assumption. When DRIP is on, after-tax dividends are added back to the investment base and can generate more future income.

year_1_income = investment_amount * dividend_yield
year_n_income = dividend_base * grown_yield * (1 - tax_rate)
if drip_on:
  dividend_base = dividend_base + year_n_income
ending_value = investment_amount + reinvested_dividends

• Dividend growth is applied to the yield assumption, not to a live share price.
• The selected tax rate reduces each dividend before any reinvestment occurs.
• The original principal is fixed, and only after-tax reinvested dividends compound when DRIP is on.

This projection models the income stream and reinvestment of dividends. Ending value excludes share-price appreciation because the engine assumes no price change, so it is not a total-return forecast.

What counts as a good yield

Investor.gov describes dividends as company profits paid to shareholders. For mature dividend payers, 2% to 5% is often a practical starting range, but yield is only one input. A very high yield can point to a falling stock price or a payout that may not be durable. Pair yield with payout ratio, balance sheet quality, and a record of dividend growth.

When to use it

• Estimating how much annual income a dividend allocation could produce from a small set of assumptions.
• Comparing DRIP versus taking cash when taxes and dividend growth are part of the setup.
• Setting rough income targets before screening for payout quality and balance-sheet strength.

When it can mislead

• High-growth, low-yield companies where most expected return depends on share-price appreciation.
• REITs, MLPs, and other structures with tax treatment that can differ from ordinary qualified dividends.
• Payers with weak coverage, elevated leverage, or very long horizons where small assumption errors compound.

Common mistakes

• Assuming a flat dividend yield will hold forever.
• Ignoring dividend cuts, suspensions, or changes in payout policy.
• Treating reinvested dividends as tax-free in a taxable account.
• Reading a very high yield as more income instead of possible business or balance-sheet distress.
• Confusing yield on cost with current dividend yield.

Worked example

The table below uses the default example assumptions entered in the calculator. It is a projection from those assumptions, not a current quote or a live dividend feed. Default inputs: $25,000 invested at 4% yield, 6% annual dividend growth, DRIP on, and a 20-year horizon.

Yield on cost means each year's dividend income divided by the original amount invested, so DRIP and dividend growth can make it climb above the starting yield.