Dividend calculator

Our dividend calculator can be used to estimate the dividend income an investor can expect from their investment in a particular stock or portfolio. It takes into account factors such as the dividend yield, the number of shares owned, the holding period, and the company’s dividend payment frequency.

Ian Hawkins

Page written by Ian Hawkins. Last reviewed on June 25, 2024. Next review due October 1, 2025.

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This calculator is intended for illustration purposes only and exact payment terms should be agreed with a lender before taking out a loan.

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Definitions:

  • Share price: The current market value of a single share of stock.
  • Expected dividend yield: Anticipated annual dividend income expressed as a percentage of the stock’s price.
  • Number of shares: The total quantity of shares held by an investor.
  • Holding period: The duration for which the shares are retained in the investor’s portfolio.
  • Compound frequency: The frequency at which dividend reinvestment occurs within the holding period.

What is dividend yield?

Dividend yield is a financial ratio that indicates the annual dividend income earned per share relative to the stock’s price. It’s calculated by dividing the annual dividend per share by the stock’s current price, expressed as a percentage. For example, if a stock pays $2 in dividends per share and its current price is $50, the dividend yield is 4%.

How to calculate dividends?

To calculate dividends, you can use the following formula:

Dividend Income = Dividend Yield × Number of Shares

The dividend yield is expressed as a percentage and represents the annual dividend income as a proportion of the investment’s current market price. It’s important to note that dividend payments can vary, and past performance is not indicative of future results.

Why is dividend yield important?

Dividend yield provides insight into the income-generating potential of a stock. It helps assess the attractiveness of a stock’s dividend payments relative to its price. A higher dividend yield may indicate a more attractive investment opportunity.

When are dividends paid?

The payment date is determined by the company’s board of directors and is usually disclosed in advance. They are typically paid out quarterly, although some companies may choose to pay them monthly or annually.

How are dividends taxed?

Dividends are taxed at different rates depending on whether they are classified as qualified or non-qualified. Qualified dividends, which meet specific criteria, are taxed at lower capital gains tax rates, while non-qualified dividends are taxed at ordinary income tax rates.

What are dividend stocks?

Dividend stocks are shares of companies that regularly distribute a portion of their earnings to shareholders in the form of dividends. These companies are typically mature, stable companies with consistent earnings and cash flow.

FAQs

A DRIP, or dividend reinvestment plan, is a program offered by some companies that allows shareholders to automatically reinvest their dividends to purchase additional shares of the company's stock. DRIPs can help investors compound their investment over time without incurring additional transaction costs.

To calculate the value of dividend payments that are reinvested, multiply the number of shares received through reinvestment by the dividend per share.

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