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Use this dividend calculator to estimate your expected return on your stock investments over a specified timeframe.
How to Use This Dividend Calculator
To use this dividend yield calculator, you need several pieces of information. No calculator can accurately predict the performance of the stock market in the future, but by using this dividend income calculator you can make estimations based on the best information you have access to.
There are six simple pieces of information you need to use this calculator:
- Stock Price. This is how much each share of your stock is currently worth.
- Number of shares. Total shares you own today.
- Holding period. The timeframe you’d like this calculator to estimate your dividend. For example, if you plan to hold shares for 10 years, this calculator estimates your dividend yield over 10 years.
- Annual Dividend Yield. The percentage of the stock’s value you expect to receive as dividends. If you don’t know your annual dividend yield, keep reading and this guide will help you through it.
- Dividend Tax Rate. Just like regular income, you’re likely to pay taxes on your dividend income. This field allows you to input the rate you expect the IRS to tax your dividends.
- Dividend Reinvestment Plan. If you plan to use your dividends to buy more of the same stock, select “yes.” Otherwise, select “no.”
Additionally, there are three optional fields that you can leave blank, but using these fields gives you a more accurate estimate:
- Annual Contribution. The amount you plan to add to your investment each year.
- Expected Rise in Dividend Payout. How much do you expect dividend payouts to increase? If you leave this field blank, the calculator assumes that your dividend payouts will stay the same each year.
- Expected Rise in Stock Price. How much do you expect the stock price to rise each year? The calculator does not accept negative values, but you can leave this field blank if you aren’t sure.
How to Calculate Dividend Yield
Dividend yield may seem complicated from the outside, but it’s more straightforward than you may think. When you own shares of stock, some companies reward their stockholders by paying out dividends.
Some corporations pay dividends every year while others only pay dividends when the business is doing well. Other corporations don’t pay dividends at all.
Calculating a dividend yield is as simple as determining how much a company pays out in dividends each year (per share of stock), multiplying that number by the number of shares you own, and then multiplying that number again by the number of years you expect to receive that dividend.
This dividend income calculator considers other factors, like how much your stock or dividend could increase over time. It’s important to know that dividend payments are completely at the discretion of each company’s board of directors, which means that shareholders may receive dividends one year but not others.
This calculator can only offer an estimation based on your best guess of how the stock will perform over time.
Dividends – When a company makes a profit, it might reward its shareholders by sending them a portion of the company’s profits. This portion of the company’s profits is a dividend, and it makes owning stock in that company more attractive.
Some companies pay dividends annually, semiannually, or even quarterly, while other companies don’t pay out dividends at all.
Dividend yield – If a dividend is a payment from a company to its shareholders, the dividend yield is a way of expressing how the amount of the dividend compares to the price of the stock.
You calculate dividend yield by dividing the annual dividend by the current stock price.
Dividend tax rate – The IRS categorizes dividends as either “qualified” or “ordinary.” Qualified dividends are dividends you receive from a domestic corporation that you’ve owned for longer than a minimum holding period, and they are taxed at the lower capital gains tax rate which is either 0%, 15%, or 20% based on your income.
The IRS taxes ordinary dividends just like regular income at your normal income tax rate.
Dividend Reinvestment Plan (DRIP) – When you receive a dividend, that money is yours to do whatever you want. However, many investors prefer to reinvest that money to buy more stock in the same company.
This is called a Dividend Reinvestment Plan (or DRIP) and is an effective way to compound your earnings over time.
Why is Dividend Yield Important?
Dividend yield gives context to how much you receive in dividends compared to how much your investment is worth. For example, if you own shares of a stock worth $500 per share, but only receive dividends of $0.25, your dividend yield is only 0.05%.
On the other hand, if you receive that same $0.25 dividend on a stock that’s only worth $2, your dividend yield is 12.5%. Even though the dividend was the same dollar amount, in one example you had to own $500 of stock to receive it, while in the other you only had to own $2 of stock.
Dividend yield shows the relationship between what you own and what you receive.
When Are Dividends Paid?
Declaration date – When a company’s board of directors announces their plan to pay dividends, that announcement is the declaration date.
For example, a company may announce on June 1 that it intends to pay a dividend on July 25. June 1 is the declaration date because that’s the date that the board of directors announced their plans to pay out dividends.
Ex-dividend date – Stocks are bought and sold every second of the trading day, so there has to be a cutoff date when the company determines whom to pay dividends to.
The last day to buy stock to receive a dividend is the Ex-Date or Ex-Dividend Date, and the day after is the Date of Record. In other words, whoever owns shares of stock at the end of the day on the Ex-Dividend Date is on the books on the Date of Record, and that record determines who receives a dividend and who won’t.
Anybody is still free to buy shares of the stock after the Ex-Dividend Date, but they won’t receive a dividend for that period.
For example, when the company’s board of directors announced on June 1that they will pay a dividend on July 25, they might have also announced an ex-dividend date of July 10, meaning that July 10 is the last day to buy stock to receive the dividend on the 25th.
Payment date – As the name suggests, the payment date is the day that the company pays out the dividend to shareholders. To receive payment on that date, you have to have owned shares as of the Date of Record (meaning you bought them on or before the Ex-Dividend Date).
How do dividends work?
Shareholders are partial owners of the company. When corporations make money, sometimes they share those profits with the owners in the form of dividends.
How much is a good dividend?
The dividend yield is the best way to compare dividends since the dollar amount alone doesn’t reflect how much you have to own to receive it.
A good dividend yield is 2-5%, and while higher dividend yields exist, you should exercise caution about deals that seem too good to be true.
Are dividends taxed?
The IRS sees dividends as a form of income, and as such, dividends are taxable—even if you reinvest them.
However, the type of stock determines how the IRS taxes it: either at the lower capital gains tax rate for qualified dividends or at your regular income tax rate for ordinary dividends
Do all stocks pay a dividend?
Dividends are an extra perk of owning shares of a successful business, but not all businesses are successful, and not all successful businesses choose to pay dividends.
Even if your stocks paid a dividend in the past, that is no guarantee that they will pay dividends in the future.