Dividend Calculator

How dividend income is worked out

The arithmetic is one multiplication. Annual income is the amount invested times the dividend yield, so $25,000 at a 4% yield pays $1,000 a year. Divide by the number of payments to get each one: $250 a quarter for a quarterly payer, $83 a month on average.

The yield is the part worth checking. A quoted yield is usually the last twelve months of dividends divided by today's share price. That makes it a description of the recent past, and it moves every time the price does. If the company has just announced a raise or a cut, the trailing figure is already out of date, and the forward yield (the next twelve months at the current rate) is the better input.

Payment frequency does not change the annual total. A monthly payer and a quarterly payer with the same yield pay the same amount over a year. Monthly payments are easier to budget around, and reinvesting them compounds very slightly faster, but the difference is small enough to ignore when choosing between two holdings.

How much you need to invest for a monthly income

Turned around, the same multiplication tells you the size of portfolio a given income needs: twelve times the monthly figure, divided by the yield. The goal field in the calculator does this for any amount.

The table makes the trade-off plain. Every point of yield you give up adds a large amount to the capital required, which is exactly why high yields are tempting and why they deserve the most scrutiny.

Where income growth comes from

Income from a holding can grow in only two ways: the company raises the dividend per share, or you own more shares. Reinvesting and adding new money both do the second. The calculator holds the yield constant, which means the price rises with the dividend, so neither effect is flattered by an assumption that shares stay cheap.

On the default inputs, $25,000 at 4% with 5% dividend growth and $200 a month added, the income almost quadruples in ten years while the money you put in roughly doubles.

Why the highest yield is rarely the best income

A yield rises when the price falls. A stock yielding 9% while its sector yields 4% is usually not a generous company; it is a company the market expects to cut. When the cut comes, the income falls and the price has often fallen further, so the investor loses on both.

Before trusting a yield, check how much of the company's earnings and free cash flow the dividend uses. A payout covered twice over by cash has room to survive a bad year. One that takes more than the business generates is being paid from debt or savings, and that ends. The dividend page for each stock on Intrinsiqq shows that coverage alongside the payment history.

For income that lasts, a 3% yield growing 7% a year overtakes a flat 5% yield in about eight years and keeps pulling away. Run both through the calculator to see it.

Common questions

How much will $10,000 earn in dividends?

At a 4% yield, $400 a year, which is $100 a quarter or about $33 a month. At 2% it is $200 a year and at 6% it is $600. The yield of the specific holding is the only input that matters for the first year.

How much do I need to invest to make $1,000 a month in dividends?

Divide $12,000 a year by the yield. At 4% that is $300,000, at 3% it is $400,000 and at 6% it is $200,000. Tax reduces what reaches you, so size the goal on the after-tax figure if the account is taxable.

What is a good dividend yield?

There is no single number, because a good yield depends on how safe and how fast-growing the dividend is. Broad US indexes have yielded between 1% and 2% in recent years. Yields of 3% to 5% from companies with covered, growing payouts are a common target for income investors. Much above that, check the payout ratio before anything else.

Should I enter the trailing or the forward yield?

Use the forward yield when the company has recently changed its dividend, because the trailing figure still reflects the old rate. Otherwise the two are close and either works.

Are dividends taxed?

In most taxable accounts, yes, in the year they are paid, whether or not you reinvest them. The rate depends on your country, your income and, in the US, whether the dividend is qualified. Inside tax-sheltered accounts they are generally not taxed on receipt. This calculator shows income before tax.

Why does the calculator keep the yield constant?

Because it is the neutral assumption. If the dividend grows 5% a year and the price grows 5% a year, the yield stays where it started. Assuming the price stays flat while the dividend rises would make reinvestment look better than it is, since every dividend would buy shares at a falling yield-adjusted price.

How is this different from the dividend reinvestment calculator?

This one answers how much income a holding pays and how much capital an income goal needs. The reinvestment calculator compares reinvesting against taking the cash over a long holding period, with separate price and dividend growth.