Dividend Calculator

Dividend yield = annual dividends per share ÷ stock price, expressed as a percentage. A stock paying $4 annually at $100/share has a 4% yield. Yields move inversely with price - a falling price raises the apparent yield, sometimes signaling distress (a "yield trap") rather than opportunity.

For broad indices, 1.5%–2% is typical for the S&P 500 historically; the dividend aristocrats average 2.5%–3.5%. Individual blue-chip dividend stocks commonly yield 3%–5%; REITs and MLPs often 4%–7%; anything above 8% should be scrutinized for sustainability. Higher yields aren't automatically better if the dividend is at risk of being cut.

Qualified dividends (most US common stocks held over 60 days) are taxed at long-term capital gains rates: 0%, 15%, or 20% federal depending on income. Non-qualified (ordinary) dividends are taxed at your marginal income rate. REITs pay non-qualified dividends. Holding dividend stocks in tax-advantaged accounts (IRAs, 401(k)s) avoids the annual tax hit entirely.

Reinvesting via DRIP (Dividend Reinvestment Plan) is one of the most powerful long-term wealth-building tools - it automates dollar-cost averaging and accelerates compounding. The S&P 500 with reinvested dividends has returned roughly 10%/year long-term vs about 7% from price alone. The trade-off: you still owe tax on dividends in taxable accounts, even when reinvested.