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Dividend Calculator
Project what a dividend portfolio pays over time, with or without reinvestment and with a dividend growth rate, so you can see what compounding contributes.
Annual dividend income in year 20
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Enter your numbers to project.
- Portfolio value
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- Total contributed
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- Total dividends paid
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- Yield on original cost
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- Monthly income
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A projection based on constant rates. Real dividends are cut, raised and suspended.
What this model does
Each year, in order:
- The portfolio pays a dividend based on the current yield on cost.
- If DRIP is on, that dividend buys more shares at the current price.
- The dividend per share grows by the dividend growth rate.
- The share price grows by the appreciation rate.
- Any annual contribution is added.
Why reinvestment matters so much
Without reinvestment, dividend income grows only as fast as the company raises its payout. With reinvestment, it grows from two sources at once: the payout rises and you own more shares each year. The two compound together.
On $50,000 at a 4% yield with 5% dividend growth, taking the cash gives you roughly $5,300 a year after twenty years. Reinvesting gives you substantially more, because every payment bought shares that then paid their own dividends. Toggle DRIP above to see the gap on your own numbers.
What this model ignores
- Dividend cuts. Companies suspend and reduce dividends, particularly in recessions. A constant growth rate assumes this never happens.
- Tax. Figures here are pre-tax. Treatment depends on your country and account type, and it materially changes real outcomes.
- Price volatility. Share prices do not rise smoothly. Reinvesting during a decline buys more shares cheaply, which helps, but the model cannot show that path dependency.
- Inflation. $40,000 of income in twenty years buys considerably less than $40,000 today.
Living off dividends
Portfolio needed = Annual spending ÷ Portfolio yield
| Annual income wanted | At 3% yield | At 4% yield | At 5% yield |
|---|---|---|---|
| $20,000 | $667,000 | $500,000 | $400,000 |
| $40,000 | $1,333,000 | $1,000,000 | $800,000 |
| $60,000 | $2,000,000 | $1,500,000 | $1,200,000 |
The obvious temptation is to chase the right-hand column. The catch is that yields above about 6% are disproportionately likely to be cut, and a cut arrives exactly when you have stopped adding new capital. Use the dividend yield calculator to check the payout ratio before relying on any yield.
Frequently asked questions
How do you calculate dividend income?
Multiply the number of shares you hold by the annual dividend per share. A hundred shares paying $2.40 a year produces $240 before tax. If you reinvest those dividends, the share count grows each period and the income compounds.
What is DRIP?
A dividend reinvestment plan automatically uses each dividend payment to buy more shares of the same stock, often commission-free and sometimes at a small discount. Because the new shares also pay dividends, income compounds rather than staying flat.
How much do I need to live off dividends?
Divide your annual spending by your portfolio yield. Living on $40,000 from a 4% yield requires about $1,000,000 invested. Chasing a higher yield to reduce that figure usually means accepting dividends that are more likely to be cut, which defeats the purpose.
Are dividends taxed?
Usually yes, though it depends on your country and account type. In the US, qualified dividends are taxed at long-term capital gains rates while ordinary dividends are taxed as income, and dividends inside tax-advantaged accounts are treated differently again. This calculator shows pre-tax figures.
Is dividend growth more important than yield?
Over long horizons, usually yes. A 2% yield growing 10% a year overtakes a static 5% yield in about seventeen years, and keeps widening after that. Dividend growth also tends to signal a healthy underlying business, whereas a high static yield often signals the opposite.