How to use the dividend calculator
- 1 Enter the amount invested and anything you add each year.
- 2 Enter the dividend yield, dividend growth and share price growth.
- 3 Choose the number of years and whether to reinvest dividends.
- 4 Choose the tax rate on dividends and read your income and portfolio value.
Worked example
$10,000 invested plus $1,200 a year, a 3.5% yield, 5% dividend growth, 4% price growth, dividends reinvested and taxed at 15%, for 20 years. Year 1 pays $297.50 after tax. By year 20, dividends reach $3,004 a year ($250 a month), after $26,388 of dividends in total, and the portfolio is worth about $91,766 for $34,000 invested.
Growing dividend income
- Reinvest while you are building, take cash once you need income.
- Hold dividend stocks in a Roth to avoid tax on the dividends.
- Be wary of very high yields: they can signal a cut.
- Diversify across many companies or use a fund.
Compare growth with the Compound Interest Calculator, tax on sales with the Capital Gains Tax Calculator, and accounts with the Roth IRA Calculator.
Features
DRIP or cash
Reinvest dividends to compound, or take them as income.
Growing dividends
Models dividend growth separately from price growth.
Qualified dividend tax
0%, 15%, 20% or 23.8% with the net investment income tax.
When to use it
Building passive income
See when dividends could cover a bill or a budget line. Plan spending with the Budget Calculator.
Retirement income
Combine with other income in the Retirement Calculator.
Choosing an account
Dividends grow tax-free in a Roth. Compare with the Roth IRA Calculator.
Comparing with interest
Compare with a CD in the CD Calculator.
Related Savings and Investing tasks
Frequently asked questions
How do I calculate dividend income?
Multiply the value of your investment by the dividend yield. $10,000 in a stock yielding 3.5% pays $350 a year before tax, or $297.50 after a 15% tax.
What is a DRIP?
A dividend reinvestment plan: dividends are used to buy more shares automatically. Those new shares then pay their own dividends, which compounds your income.
What is dividend growth?
The yearly increase in the dividend a company pays. Many established companies raise their dividend every year; 5% a year doubles the dividend in about 14 years.
How are dividends taxed?
Qualified dividends are taxed at 0%, 15% or 20%, depending on your income, plus 3.8% net investment income tax at high incomes. Non-qualified dividends are taxed as ordinary income.
What makes a dividend qualified?
It must be paid by a US company or a qualifying foreign company, and you must hold the shares for more than 60 days in the 121-day period around the ex-dividend date.
Are dividends in an IRA taxed?
Not when they are paid. In a traditional IRA or 401(k), withdrawals are taxed as income later; in a Roth IRA, qualified withdrawals are tax-free.
What is a good dividend yield?
Broad US stock funds yield about 1% to 2%; dividend-focused funds 3% to 4%. Very high yields can be a sign that the dividend may be cut.
How much do I need to invest for $1,000 a month in dividends?
At a 4% yield, about $300,000 before tax. With a 15% tax, about $353,000.
Are dividends guaranteed?
No. Companies can cut or stop dividends, and share prices go up and down. The calculator uses steady growth rates as an estimate.
Does this include price growth?
Yes. The portfolio value grows with the share price growth you enter, plus any dividends you reinvest and the amounts you add.
Results are estimates based on the official rates linked above. Confirm important figures with the issuing authority or a qualified adviser before you act on them.
Built and reviewed by Hamza Farooq, founder and lead developer
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