Dividend calculator

What is a dividend calculator?

The Swoop dividend calculator is a tool that helps you estimate the potential returns from investing in dividend-paying stocks. When you enter key investment details such as the share price, number of shares, holding period, and dividend payment frequency, investors can calculate the outcomes such as; total money invested, final account balance, dividend profits, and overall portfolio growth. 

This helps investors, like you, decide whether a specific stock fits their financial goals. 

How do I use a dividend calculator?

To use the Swoop dividend calculator you only need a few input details:

1. Specify the current market price of the stock. This sets the base for your investment amount.
2. Input how many shares you plan to purchase. This determines your total investment.
3. Choose how long you intend to hold the investment, typically measured in years.
4. Decide how often dividends are reinvested (monthly, quarterly, or annually).

Once these fields are completed, the calculator will display the total amount invested, expected dividend payments, total profits, and projected account balance at the end of the holding period. 

Dividend definitions explained

Dividend yield

Dividend yield measures how much a company pays its shareholders in dividends compared to its share price. It’s shown as a percentage and calculated using the formula:

Dividend yield= (Annual dividend per share / Share price ) x 100

Example

If a stock pays $2 annually in dividends and its current share price is $100, its dividend yield is 2%. A higher yield indicates more income per dollar invested, making it attractive to income-focused investors. 

However, a high yield can also be a sign pointing to underlying risks, so investors should evaluate the company’s financial stability.

Dividend per share

Dividend per share (DPS) is the total dividend paid per share over a period of time, generally a year. It’s calculated by dividing the company’s total dividend payments by its outstanding shares:

DPS = Total dividends paid / Number of shares outstanding

Example

If a company distributes $1 million in dividends and has 500,000 outstanding shares, its DPS is $2. Investors use DPS to see how much income they’ll receive for every share they own and know the stock’s income-generating potential.

Dividend minus tax

As with all income-generating assets, dividend income is usually subject to taxation, which can hurt your overall returns. The taxes depend on where you’re located, how long you held the asset before selling, and whether the dividends are classified as qualified or ordinary. 

Qualified dividends usually enjoy lower tax rates if the shares are held for a minimum period.

Ordinary dividends are taxed at regular income rates. 

Example

Let’s say an investor earns $1,000 in dividends and faces a 15% tax rate, their after-tax dividend income would be $850. Using a dividend calculator that factors in taxes can provide a clearer picture of net investment returns.

Preferred dividends

Preferred dividends are like the premium tier of payments made to holders of preferred stock, which differs from common stock. 

Preferred shareholders receive fixed dividends before common shareholders and have a higher claim on the company’s assets if it goes bankrupt. These dividends are generally set at a fixed annual rate, providing consistent income. 

Example

For example, if a preferred stock pays a fixed dividend of $5 per share annually and an investor holds 200 shares, they’ll receive $1,000 in dividends each year, regardless of the company’s profitability ebs and flows.

Dividend payments

Dividend payments are the portion of a company’s profits actually paid out to its shareholders. Payments can be distributed quarterly, semi-annually, or annually, depending on the company’s dividend policy. The more often the better since regular dividend payments are a sign of financial stability for the company.

Example

Here’s a fictitious case for dividend payment. A company pays quarterly dividends of $2 per share and an investor holds 1,000 shares, they’ll receive $2,000 per quarter or $8,000 annually. 

Growth rate

When you hear the term ‘growth rate’ it could apply to multiple aspects but here we’re employing it for dividends themselves. The dividend growth rate measures how much a company’s dividends increase over time. It’s calculated using historical dividend payments and can signal future dividend potential. The formula is:

Growth rate  = (recent div. / past div. )^ 1/n – 1

Where n is the number of years. 

Example

If a company’s dividend grew from $2 to $3 over five years, the annual dividend growth rate would be approximately 8.45%. 

Dividends on a balance sheet

Dividends appear on a company’s balance sheet (one of its main financial statements) as a reduction in retained earnings after they’ve been paid out (declared).

Retained earnings are just as you would assume– earnings that were kept in-house or ‘retained’, to be reinvested rather than distributed. When a dividend is declared, it’s recorded as a liability under “dividends payable” until the payment is made. 

Example

Let’s say a company declares $500,000 in dividends, its retained earnings decrease by the same amount, reducing the company’s equity. Basically, this helps investors know which profit is being reinvested in growth versus paid out.

How Swoop can help

Swoop’s platform empowers investors by offering financial tools like a dividend calculator to project future returns on investments. But we are so much more. With Swoop, you can explore a wide range of funding options for your business including loans, grants, and alternative financing. 

Ready to get started? Sign up today to start planning your next move.