Dividend Growth Calculator

Frequently Asked Questions

What is the dividend discount model?

Stock value = next year's dividend / (required return - growth rate). The Gordon Growth version assumes constant perpetual growth. It is most useful for stable, mature dividend payers and breaks down for non-dividend or fast-growing stocks.

What is a sustainable dividend growth rate?

Long-run dividend growth tracks earnings growth, which historically averages 5-7% nominally for large companies. Promised growth above 10-15% for established firms is rarely sustained beyond a few years.

What are Dividend Aristocrats and Kings?

Aristocrats are S&P 500 companies that have raised dividends for 25+ consecutive years (about 65 stocks). Kings have raised them for 50+ years (around 50 stocks). Both groups have historically delivered modest outperformance with lower volatility.

What is the chowder rule?

A dividend-growth screen popularized by online investors: dividend yield + 5-year dividend growth rate should exceed 12% (or 8% for utilities). It balances current income with growth potential.

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Estimates only. Not investment advice.

Investment Disclaimer: Estimates only. Not investment advice.

This calculator provides estimates for educational purposes only and is not investment advice. Past performance does not guarantee future results. Consult with a qualified financial advisor before making investment decisions. All investments carry risk, including potential loss of principal.

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How This Calculator Works

You provide the current annual dividend per share, an assumed annual growth rate (g), the number of years to project, and how many shares you hold. The tool compounds the dividend forward year by year and reports the projected dividend per share at the end, the total percentage growth, your annual income in the final year, and the cumulative income collected across the whole period (the sum of every year's payout). It also builds a year-by-year table and classifies the growth rate into a tier - from declining or frozen, through slow, steady, and strong growers, up to exceptional rates that warrant a sustainability check.

The Formula

Future dividend = Current dividend × (1 + g)ⁿ, where n is the number of years. Annual income in any year y = current × (1 + g)^y × shares, and cumulative income is the sum of those yearly figures - a geometric series. This is the same compounding engine behind the Gordon Growth Model used to value dividend stocks. Note the tool projects the income stream; it does not assume dividends are reinvested.

Worked Example

Start with a $2.00 dividend growing 7% per year over 10 years on 500 shares. After 10 years the dividend per share is 2.00 × 1.07¹⁰ ≈ $3.93, a total growth of about 97%. Final-year income = 3.93 × 500 ≈ $1,966, versus $1,000 today. Summed across all ten years, cumulative income is roughly $13,800. If you bought at $50 a share, that rising $3.93 payout is a 7.9% yield on cost even though new buyers still see only a 4% yield - the core appeal of holding dividend growers.

Common Mistakes

Extrapolating a recent high growth rate forever - 15–25% rates rarely persist for decades and usually revert.

Ignoring the payout ratio; once it climbs toward 80%+, dividend growth must slow or the dividend gets cut, as AT&T and General Electric investors learned.

Comparing the projected income to today's dollars without adjusting for inflation.

Confusing this income projection with total return - it excludes share-price changes and dividend reinvestment.

Tips & FAQ

Realistic growth rates by type: mature utilities and telcos 2–4%, consumer staples like KO and PG 5–7%, Dividend Aristocrats roughly 6–8%, and tech growers like MSFT and AAPL 8–12%. At 3% inflation, a 5% grower delivers about 2% real income growth, while a flat dividend loses purchasing power every year - which is why "moderate yield, steady growth" tends to beat "high yield, no growth" over 20-plus-year horizons. Always check that dividend growth is supported by earnings growth. Educational only, not investment advice.

Dividend Growth Calculator

Frequently Asked Questions

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