Calculate dividend growth by solving for current income, growth rate, years, or final income when you enter any three values in the formula.
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Dividend Growth Formula
The dividend growth calculator uses compound growth. Enter any three values to solve for the missing value: current dividend income, dividend growth rate, number of years, or final dividend income.
- FI = final dividend income
- CI = current dividend income
- g = underlying dividend growth rate, as a percent per year
- t = number of years
- ln = natural logarithm
The final income formula estimates future dividend income after compounding at a steady annual growth rate. The current income formula works backward from a future dividend income target. The growth rate formula finds the annual growth rate needed to move from current income to final income over a set number of years. The years formula finds how long it takes for dividend income to reach a target at a given growth rate.
Dividend Growth Rate Reference
Dividend growth rates vary by company, sector, payout ratio, and business cycle. The table below gives general interpretation ranges for annual dividend income growth.
| Annual dividend growth rate | General interpretation |
|---|---|
| 0% | Dividend income stays flat. |
| 1% to 3% | Slow dividend growth, often close to inflation in normal periods. |
| 4% to 7% | Moderate dividend growth. |
| 8% to 12% | Strong dividend growth, but may be harder to maintain long term. |
| Above 12% | Very high growth, often requiring careful review of sustainability. |
Time Needed to Double Dividend Income
This table shows about how long it takes for dividend income to double at different annual growth rates, assuming the rate stays constant.
| Annual growth rate | Approximate years to double |
|---|---|
| 3% | 23.45 years |
| 5% | 14.21 years |
| 7% | 10.24 years |
| 10% | 7.27 years |
Example Calculations
Example 1: Calculate final dividend income
You currently receive $2,000 per year in dividend income. You expect dividend income to grow by 6% per year for 10 years.
The estimated final dividend income is $3,581.70.
Example 2: Calculate the required dividend growth rate
You currently receive $1,500 per year in dividend income and want it to reach $3,000 in 12 years.
The required annual dividend growth rate is 5.95%.
FAQ
Does this calculator include reinvested dividends?
No. This calculator estimates dividend income growth from an underlying growth rate. It does not add extra shares from dividend reinvestment unless your growth rate already reflects the effect of reinvestment.
Is dividend growth the same as stock price growth?
No. Dividend growth measures how dividend income changes over time. Stock price growth measures how the market value of the shares changes. A stock can have growing dividends while its share price rises, falls, or stays flat.
Can the dividend growth rate be negative?
Yes, a negative growth rate represents shrinking dividend income. The calculator allows negative rates greater than -100%. A rate of -100% or lower would make the compounding base zero or negative, which is not valid for these formulas.
