The company's net income divided by shareholders' equity.
Percentage of earnings paid out as dividends.
Anticipated Sustainable Growth Rate
0.00%
Implied Retention Ratio: 0%
Historical Compound Annual Growth Rate
0.00%
Total Increase: 0% over 0 years.
Anticipated Dividend Growth Rate Calculator
Understanding the anticipated growth rate of a company's dividend is crucial for income investors and those using the Dividend Discount Model (DDM) to value stocks. This calculator provides two distinct methods for estimating future growth: the Sustainable Growth Rate model based on company fundamentals, and the Historical CAGR model based on past performance.
Method 1: Sustainable Growth Rate (Fundamental)
The Sustainable Growth Rate (SGR) estimates how fast a company can grow its dividends without raising additional equity or debt. It relies on the logic that growth comes from earnings that are reinvested back into the company rather than paid out.
g = ROE × (1 – Payout Ratio)
Return on Equity (ROE): Measures profitability by revealing how much profit a company generates with the money shareholders have invested.
Retention Ratio (1 – Payout Ratio): The percentage of net income that is kept by the company to fuel future growth.
Example: If a company has an ROE of 15% and pays out 40% of its earnings as dividends, it retains 60%. The anticipated growth rate is 15% × 0.60 = 9%.
Method 2: Historical CAGR
The Compound Annual Growth Rate (CAGR) looks at the actual track record of dividend raises over a specific period. While past performance does not guarantee future results, a consistent track record often indicates management's commitment to returning value to shareholders.
Slow growth, often typical of mature utilities or high-yield sectors engaging in inflation matching.
4% – 9%
Moderate growth, often seen in "Dividend Aristocrats" and established blue-chip companies.
10%+
Aggressive growth, typical of younger companies or those rapidly expanding earnings.
Why Dividend Growth Matters
A static dividend yield loses purchasing power over time due to inflation. A growing dividend stream not only protects your purchasing power but also increases your "Yield on Cost" over time. Accurately estimating the dividend growth rate (g) is also the most sensitive variable in the Gordon Growth Model equation used to determine fair stock value.
function switchTab(method) {
var fundSection = document.getElementById('fundamental-section');
var histSection = document.getElementById('historical-section');
var tabFund = document.getElementById('tab-fund');
var tabHist = document.getElementById('tab-hist');
if (method === 'fundamental') {
fundSection.classList.add('active');
histSection.classList.remove('active');
tabFund.classList.add('active');
tabHist.classList.remove('active');
} else {
fundSection.classList.remove('active');
histSection.classList.add('active');
tabFund.classList.remove('active');
tabHist.classList.add('active');
}
}
function calculateSustainableGrowth() {
// Get input values
var roe = parseFloat(document.getElementById('roe').value);
var payoutRatio = parseFloat(document.getElementById('payoutRatio').value);
var resultBox = document.getElementById('result-fund');
var outputElement = document.getElementById('fund-output');
var retentionElement = document.getElementById('retention-output');
// Validation
if (isNaN(roe) || isNaN(payoutRatio)) {
alert("Please enter valid numbers for ROE and Payout Ratio.");
return;
}
if (payoutRatio 100) {
alert("Payout Ratio must be between 0 and 100.");
return;
}
// Calculation: g = ROE * (1 – Payout Ratio)
// Convert percentages to decimals for calculation
var retentionRatioPct = 100 – payoutRatio;
var retentionRatioDecimal = retentionRatioPct / 100;
var growthRate = roe * retentionRatioDecimal;
// Display results
resultBox.style.display = "block";
outputElement.innerHTML = growthRate.toFixed(2) + "%";
retentionElement.innerHTML = retentionRatioPct.toFixed(2) + "%";
}
function calculateHistoricalGrowth() {
// Get input values
var startDiv = parseFloat(document.getElementById('startDiv').value);
var endDiv = parseFloat(document.getElementById('endDiv').value);
var years = parseFloat(document.getElementById('years').value);
var resultBox = document.getElementById('result-hist');
var outputElement = document.getElementById('hist-output');
var totalIncreaseElement = document.getElementById('total-increase-output');
var yearsDisplay = document.getElementById('years-display');
// Validation
if (isNaN(startDiv) || isNaN(endDiv) || isNaN(years)) {
alert("Please enter valid numbers for Dividends and Time Period.");
return;
}
if (startDiv <= 0 || years <= 0) {
alert("Starting dividend and years must be greater than zero.");
return;
}
// Calculation: CAGR = (End / Start)^(1/n) – 1
var growthFactor = endDiv / startDiv;
var cagr = (Math.pow(growthFactor, (1 / years)) – 1) * 100;
var totalIncrease = ((endDiv – startDiv) / startDiv) * 100;
// Display results
resultBox.style.display = "block";
outputElement.innerHTML = cagr.toFixed(2) + "%";
totalIncreaseElement.innerHTML = totalIncrease.toFixed(2) + "%";
yearsDisplay.innerHTML = years;
}