# How will my dividend income grow?

Projects the dividend income and value of a dividend stock or fund from its yield, dividend growth, price growth, and reinvestment (DRIP), with optional monthly additions.

- Page: https://www.acalculator.org/finance/dividend-calculator
- JSON spec: https://www.acalculator.org/finance/dividend-calculator.json
- Version: 4d74c21a29dc

## Default answer

Example with the default inputs (Amount invested $10,000.00, Share price today $50.00, Dividend yield 4%, For how long? (years) 20, Dividends are paid Quarterly, Reinvest dividends (DRIP) Yes, Dividend growth each year 5%, Share price growth each year 3%, Add each month $0.00, Tax on dividends 0%): Investing $10,000.00 at a 4% yield for 20 years grows to $46,373.83, paying $2,506.35 in dividends in the last year.

## Inputs

| Key | Label | Description |
| --- | --- | --- |
| initial | Amount invested | The amount invested today, which buys shares at today’s price. |
| price | Share price today | The price of one share today. |
| yield | Dividend yield | The yearly dividend per share as a percent of today’s share price. |
| years | For how long? (years) | How many years you hold the investment. |
| freq | Dividends are paid | How often dividends are paid: monthly (12), quarterly (4), twice a year (2), or yearly (1). |
| drip | Reinvest dividends (DRIP) | When on, each dividend (after tax) buys more shares at that day’s price. When off, you keep it as cash. |
| divgrowth | Dividend growth each year | The percent the dividend per share goes up at the start of each new year. |
| pricegrowth | Share price growth each year | The yearly growth of the share price, spread evenly over the months. |
| add | Add each month | An amount invested at the end of every month, buying shares at that month’s price. |
| tax | Tax on dividends | The tax rate taken from each dividend before it is reinvested or kept. |

## Outputs

| Key | Label | Description |
| --- | --- | --- |
| total | Your investment will be worth | The value of your shares at the end, plus any dividends kept as cash. |
| income | Dividends in the last year | The dividends paid, after tax, in the last 12 months. |
| dividends | Total dividends | Every dividend paid, after tax, whether reinvested or kept. |
| invested | Money put in | The amount invested today plus every monthly addition. |
| yieldOnCost | Yield on cost | Dividends in the last year ÷ money put in. |
| shares | Shares at the end | The shares you own at the end. |
| value | Value of your shares | Shares at the end times the share price at the end. |

## Method

Each month the price is P × (1 + g)^(m/12); in a payout month the dividend is shares × P × yield × (1 + d)^(year − 1) ÷ payouts a year, less tax, and with DRIP it buys shares at that month’s price.

## Assumptions

- The yield is the yearly dividend per share as a percent of today’s price, and the dividend per share rises once a year.
- The share price grows smoothly at a steady yearly rate. Real prices and dividends go up and down, and dividends can be cut.
- Dividends are paid at the end of the months that end each payout period (quarterly: months 3, 6, 9, 12).
- Reinvested dividends and monthly additions buy shares (including fractions) at that month’s price, with no fees.
- This is an estimate for planning, not financial advice.

## Worked examples

1. initial = $5,000.00, price = $50.00, yield = 4%, years = 1, freq = 4, drip = no, divgrowth = 0%, pricegrowth = 0% gives dividends = $200.00, income = $200.00, value = $5,000.00, total = $5,200.00, shares = 100, yieldOnCost = 4%. Source: hand calculation in content.mdx: 100 shares × $2 a year.
2. initial = $10,000.00, price = $50.00, yield = 4%, years = 1, freq = 4, drip = yes, divgrowth = 0%, pricegrowth = 0% gives shares = 208.120802, total = $10,406.04, dividends = $406.04. Source: hand calculation in content.mdx: each quarter the shares grow by 1%, 200 × 1.01⁴.
3. initial = $10,000.00, price = $50.00, yield = 4%, years = 2, freq = 1, drip = no, divgrowth = 10%, pricegrowth = 5%, tax = 15% gives dividends = $714.00, income = $374.00, value = $11,025.00. Source: hand calculation in content.mdx: 200 × 2 × 0.85 = 340, then 200 × 2.20 × 0.85 = 374; 200 × 50 × 1.05².
4. initial = $10,000.00, price = $50.00, yield = 4%, years = 20, freq = 4, drip = yes, divgrowth = 5%, pricegrowth = 3% gives total = $46,373.83, shares = 513.521361, income = $2,506.35. Source: month by month with the steps in content.mdx; checked in Python (docs/progress/WP-32/python/dividend.py).

## FAQ

### What is a dividend yield?

It is the yearly dividend per share divided by the share price. A $50 share that pays $2 a year has a 4% yield. If you invest $10,000, you own 200 shares and receive $400 a year before tax.

### What is a DRIP?

A dividend reinvestment plan (DRIP) uses each dividend to buy more shares, often including fractions of a share, instead of paying you cash. Those new shares earn dividends too, so income grows faster. Many companies and brokers offer this.

### What is dividend growth?

Many companies raise their dividend over time. With 5% dividend growth, a $2.00 yearly dividend per share becomes $2.10 the next year. Dividends are not guaranteed: a company can also cut or stop them.

### What is yield on cost?

It is your yearly dividend income divided by the money you put in. If dividends grow, your yield on cost rises even though the stock’s current yield may not.

### Are dividends taxed?

In a taxable US account, yes. Qualified dividends are taxed at the lower long-term capital gains rates, and other (ordinary) dividends at your income tax rate. Reinvested dividends are taxed the same as cash. Enter your rate under "Growth, additions and tax" to see income after tax.

### Why is my answer different from what I actually get?

The calculator uses steady growth rates. Real share prices move every day, dividends change, and you may pay fees. Use it to see how yield, growth, and reinvesting add up over time, not to predict a stock.

## Sources

- U.S. Securities and Exchange Commission, Investor.gov: Dividend. https://www.investor.gov/introduction-investing/investing-basics/glossary/dividend
- U.S. Securities and Exchange Commission, Investor.gov: Direct investment plans, including dividend reinvestment plans (DRIPs). https://www.investor.gov/introduction-investing/investing-basics/glossary/direct-investment-plans-buying-stock-directly
- Internal Revenue Service, Topic no. 404, Dividends. https://www.irs.gov/taxtopics/tc404