Dividend Growth Calculator: measure, compare, and project dividend income

Dividend growth is one of the simplest “quiet compounding” forces in long-term investing: if a company can steadily increase the cash it pays out, your income can rise year after year even if you never buy another share. But dividend growth is also easy to misread. A dividend that “doubles” sounds great—until you realize it took 20 years. This calculator turns raw dividend history into a clean annualized growth rate (CAGR), then uses that rate to project future dividends and income.

What this calculator does

• Calculates historical dividend growth rate from a starting annual dividend per share and an ending annual dividend per share across a chosen number of years.
• Projects future dividends per share using a constant growth assumption.
• Estimates your dividend income based on the number of shares you own and your dividend payment frequency (annual/quarterly/monthly).
• Optional yield metrics: “yield on cost” (based on your purchase price) and “current yield” (based on today’s price).

The core formula (Dividend CAGR)

Dividend growth is typically expressed as a compound annual growth rate (CAGR), the same idea used for portfolio growth. If your dividend per share grew from D₀ to D_n over n years, the annualized growth rate g is:

Why use CAGR instead of a simple percentage change? Because CAGR respects compounding. A 10% “total increase” over 10 years is not the same as a 10% per-year growth rate. CAGR converts “start → end over time” into a single rate that you can compare across stocks, funds, or time periods.

Projecting dividends into the future

Once you have a growth rate, a simple forward projection assumes dividends grow at a constant rate. If your current annual dividend per share is D and growth rate is g, then in t years:

To turn per-share dividends into your estimated income, multiply by your share count. If the dividend is paid quarterly, your annual income is still the same, but each payment is about one-quarter of that annual total. This calculator shows both the annual income and an estimated per-payment amount based on the frequency you choose.

Worked examples (with intuition)

Example 1: Find the historical dividend growth rate

Suppose a company paid $1.20 per share annually five years ago, and now pays $2.00 per share annually. The growth rate is:

• D₀ = 1.20
• D_n = 2.00
• n = 5 years

Compute: g = (2.00 / 1.20)^1/5 − 1 ≈ 10.8%/year. That’s a meaningful rate because it is “compounded annually.” If the company can keep that pace (big “if”), your dividend per share roughly doubles every ~7 years (Rule of 72 style: 72 / 10.8 ≈ 6.7).

Example 2: Project dividend income for your shares

If you own 250 shares, your current annual income is 250 × $2.00 = $500/year. If dividends grow at 10.8%/year, then 10 years from now the dividend per share would be:

D₁₀ = 2.00 × (1.108)¹⁰ ≈ $5.58 per share. Your projected annual income becomes 250 × 5.58 ≈ $1,395/year.

Example 3: Yield on cost vs current yield

If you bought at $40/share, your yield on cost today is 2.00 / 40 = 5.0%. If the stock now trades at $55/share, the current yield is 2.00 / 55 ≈ 3.64%. Both numbers are “true,” but they answer different questions:

• Yield on cost tells you how your income compares to what you paid (useful for motivation and long-term tracking).
• Current yield tells you what you’d earn if you bought at today’s price (useful for comparing alternatives right now).

How to interpret the results (and avoid common traps)

• High growth rates are harder to sustain. A company can raise dividends 20% for a few years, but 20% for 20 years is rare.
• Dividend cuts reset the story. CAGR assumes a smooth path; cuts create a “break” in the compounding narrative.
• Inflation matters. A 4% dividend growth rate in a 5% inflation environment means your purchasing power is slipping. (See the Inflation Adjusted Return tool.)
• Total return still matters. Dividends are one part of return; price appreciation and valuation shifts also drive outcomes.

FAQs

Is dividend growth the same as dividend yield?

No. Dividend yield is the dividend divided by the current price (a snapshot). Dividend growth is how fast the dividend per share is increasing over time (a trend). A stock can have a low yield but high growth (classic “dividend growers”), or a high yield but slow growth (often mature or riskier payouts).

Should I use annual or quarterly dividend amounts?

Use annualized dividend per share for consistency. If a company pays $0.50 quarterly, that’s $2.00 annualized. Quarterly vs monthly mainly affects how you think about cash flow timing, not the annual total.

What if dividends don’t grow smoothly?

That’s normal. CAGR is a “best single number” summary. If dividends were irregular, consider calculating CAGR over multiple windows (3-year, 5-year, 10-year) and compare them. If the shorter window is much higher than the longer window, recent growth may be unusually strong (or the starting point may be unusually low).

Does this include dividend reinvestment (DRIP)?

This tool focuses on dividend per share growth and your income based on your current share count. If you reinvest dividends, your share count can grow too, which compounds income faster. For that scenario, use the Dividend Reinvestment Calculator and Portfolio Growth tools.

What growth rate should I assume for projections?

A practical approach is to start with the historical CAGR (from this calculator), then stress-test with a lower rate. Many investors run three scenarios: conservative, base case, and optimistic. Even a 2–4% difference in growth rate can create a large difference over 10–20 years.

Can I use this for ETFs or funds?

Yes, as long as you have a consistent “dividend per share” (or distribution per share) history. Just remember that fund distributions can be influenced by underlying holdings, portfolio turnover, and tax distributions, so the pattern can be noisier than a single stock.

Is dividend growth guaranteed?

No. Dividends are discretionary. Companies can pause increases, reduce payouts, or cut dividends entirely—especially during recessions, cash crunches, or strategic shifts. Treat projections as “planning numbers,” not promises.

Pro tip: make it viral and useful

If you’re sharing this tool with friends, share a scenario: “If my dividend grows at 8% for 15 years, what does my income look like?” People love seeing a simple table that turns time into income.