Future Projection: If this rate continues, in 5 more years the dividend could be $0.00 per share.
function calculateGrowth() {
// Clear errors
var errorDiv = document.getElementById("error-message");
errorDiv.style.display = "none";
errorDiv.innerHTML = "";
// Get inputs
var startVal = parseFloat(document.getElementById("startDividend").value);
var endVal = parseFloat(document.getElementById("endDividend").value);
var years = parseFloat(document.getElementById("timePeriod").value);
// Validation
if (isNaN(startVal) || isNaN(endVal) || isNaN(years)) {
errorDiv.innerHTML = "Please enter valid numeric values for all fields.";
errorDiv.style.display = "block";
document.getElementById("result-area").style.display = "none";
return;
}
if (startVal <= 0 || years <= 0) {
errorDiv.innerHTML = "Initial dividend and years must be greater than zero.";
errorDiv.style.display = "block";
document.getElementById("result-area").style.display = "none";
return;
}
// Calculation Logic: CAGR Formula
// CAGR = (End Value / Start Value) ^ (1 / n) – 1
var ratio = endVal / startVal;
var power = 1 / years;
var cagrDecimal = Math.pow(ratio, power) – 1;
var cagrPercent = cagrDecimal * 100;
// Future Projection (5 years out)
var futureVal = endVal * Math.pow((1 + cagrDecimal), 5);
// Display Results
var resultArea = document.getElementById("result-area");
var cagrDisplay = document.getElementById("result-cagr");
var explanation = document.getElementById("result-explanation");
var futureDisplay = document.getElementById("future-val");
resultArea.style.display = "block";
cagrDisplay.innerHTML = cagrPercent.toFixed(2) + "%";
// Color coding for negative growth
if (cagrPercent < 0) {
cagrDisplay.style.color = "#d32f2f";
explanation.innerHTML = "The dividend has decreased over this period.";
} else {
cagrDisplay.style.color = "#2c7744";
explanation.innerHTML = "The dividend grew from $" + startVal.toFixed(2) + " to $" + endVal.toFixed(2) + " over " + years + " years.";
}
futureDisplay.innerHTML = "$" + futureVal.toFixed(2);
}
function resetCalc() {
document.getElementById("startDividend").value = "";
document.getElementById("endDividend").value = "";
document.getElementById("timePeriod").value = "";
document.getElementById("result-area").style.display = "none";
document.getElementById("error-message").style.display = "none";
}
Understanding Dividend Growth Rate
For income-focused investors, the current dividend yield tells only half the story. The Dividend Growth Rate (DGR) is a crucial metric that measures the annualized percentage rate of growth that a particular stock's dividend undergoes over a specific period. It is essentially the "pay raise" an investor receives each year for holding the stock.
Companies that consistently increase their dividends are often referred to as "Dividend Aristocrats" (25+ years of consecutive increases) or "Dividend Kings" (50+ years). Calculating the growth rate helps investors differentiate between stagnant income stocks and dynamic wealth compounders.
How the Calculation Works
This calculator uses the Compound Annual Growth Rate (CAGR) formula to smooth out the volatility of year-to-year changes and provide a single geometric mean representing the growth.
CAGR = (Ending Dividend / Beginning Dividend) ^ (1 / Number of Years) – 1
For example, if a company paid $1.00 per share 5 years ago and pays $1.50 today:
Beginning Dividend: $1.00
Ending Dividend: $1.50
Time Period: 5 Years
Calculation: (1.50 / 1.00)^(1/5) – 1 ≈ 0.0844 or 8.44%
Why Dividend Growth Matters for Inflation
Inflation erodes purchasing power over time. If you live off passive income, a fixed payment that doesn't rise will eventually buy fewer goods and services. A robust Dividend Growth Rate acts as a hedge against inflation.
Ideally, an investor seeks a DGR that exceeds the current inflation rate. For instance, if inflation is 3% and your portfolio's dividend growth rate is 7%, your purchasing power is actually increasing by 4% annually, independent of the stock price appreciation.
Interpreting the Results
When analyzing the output from the calculator above, consider the following benchmarks:
0% to 3%: Low growth, barely keeping pace with historical inflation. Often typical of high-yield utilities or telecoms.
4% to 9%: Moderate to strong growth. Common among mature industrial or consumer staple companies.
10%+: Aggressive growth. Often seen in technology companies or financial institutions with lower payout ratios initiating dividends.
Note: Past performance is not indicative of future results. A company with a high historical growth rate may slow down its increases as it matures.