Growth Rate of Dividend Calculator

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Dividend Growth Rate Calculator

For income-focused investors, the current dividend yield is only part of the story. The rate at which a company increases its dividend payout over time—the dividend growth rate—is crucial for understanding future income potential and holding purchasing power against inflation. A consistently growing dividend is often the sign of a healthy, maturing company with increasing free cash flow.

Use the calculator below to determine the Compound Annual Growth Rate (CAGR) of a stock's dividend over a specific period. This metric smooths out the volatility of individual years to give you a clear picture of the average annual increase.

Calculate Dividend CAGR

The annual dividend amount at the beginning of your chosen timeframe.
The most recent annual dividend amount.
The duration between the initial and current dividend payments.
function calculateDividendGrowth() { // 1. Get input values var initialDivInput = document.getElementById("initialDiv").value; var finalDivInput = document.getElementById("finalDiv").value; var numYearsInput = document.getElementById("numYears").value; var resultBox = document.getElementById("dividendResult"); // 2. Parse values var initialDiv = parseFloat(initialDivInput); var finalDiv = parseFloat(finalDivInput); var years = parseInt(numYearsInput); // 3. Validate inputs if (isNaN(initialDiv) || isNaN(finalDiv) || isNaN(years)) { resultBox.style.display = "block"; resultBox.innerHTML = "Please enter valid numbers for all fields."; return; } if (initialDiv <= 0) { resultBox.style.display = "block"; resultBox.innerHTML = "Initial dividend must be greater than zero to calculate growth."; return; } if (years 0) { trend = "Growth"; trendColor = "#28a745"; // Green } else if (cagrPercent < 0) { trend = "Decline"; trendColor = "#dc3545"; // Red } else { trend = "Stagnation"; trendColor = "#6c757d"; // Grey } // 5. Display result resultBox.style.display = "block"; resultBox.innerHTML = "

Compound Annual Growth Rate: " + cagrPercent.toFixed(2) + "%

" + "Over the past " + years + " years, the dividend has experienced an average annualized " + trend.toLowerCase() + " of " + Math.abs(cagrPercent).toFixed(2) + "%." + "Assuming this rate continues, the dividend would double in approximately " + (72 / Math.abs(cagrPercent)).toFixed(1) + " years (Rule of 72)."; }

Understanding the Dividend Growth Formula

This calculator uses the Compound Annual Growth Rate (CAGR) formula. Unlike a simple average growth rate, CAGR accounts for the compounding effect of increases year over year. It answers the question: "What constant annual growth rate would take the dividend from its starting value to its ending value over the given time period?"

The mathematical formula used is:

CAGR = (Current Dividend / Initial Dividend)(1 / Number of Years) – 1

A Realistic Example

Let's say you are analyzing a utility stock "Company XYZ".

  • Five years ago (the Initial period), they paid an annual dividend of $1.20 per share.
  • Today (the Current period), they pay an annual dividend of $1.85 per share.
  • The time period is 5 years.

Plugging these numbers into the calculator: ($1.85 / $1.20)^(1/5) – 1 = 0.0905. Expressed as a percentage, the dividend growth rate is 9.05%. This means the company has raised its dividend by an average of just over 9% every year for the last half-decade.

Why Dividend Growth Matters

While a high starting yield is attractive, a stagnant dividend loses purchasing power due to inflation. A double-digit dividend growth rate can quickly turn a modest yield into a substantial income stream on your original investment (yield on cost) over 10 or 20 years. Consistent dividend growth is also a strong indicator of management confidence in future earnings.

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