Comprehensive Guide
Learn more in our Investing Guide.
How it works
Dividend growth investing builds passive income that increases every year. The calculator projects future dividend income by compounding three factors: your annual contributions buying new shares, existing dividends reinvested buying more shares (DRIP), and companies raising dividends annually. A $2,000/year dividend portfolio growing at 7% annually doubles income every 10 years. Combined with annual contributions and share price appreciation, the compounding effect creates exponential income growth. Yield on cost shows your return relative to total amount invested — often reaching 10–15%+ after decades of growth. Compound interest works in your favor when you save and against you when you borrow. At 7 percent annual return, money doubles roughly every 10 years. At 20 percent credit card APR, debt doubles every 3.5 years. This asymmetry is why paying off high-interest debt before investing is almost always the right move — you are eliminating a guaranteed negative return that exceeds any reasonable investment return.Formula
Future dividends = Current × (1 + growth)^years + Contributions × ((1 + growth)^years − 1) ÷ growth
Tips
- Dividend growth rate of 7% doubles income every 10 years (Rule of 72).
- Reinvesting dividends (DRIP) accelerates compounding significantly.
- Focus on companies with 10+ years of consecutive dividend increases (Dividend Aristocrats).
- Yield on cost becomes impressive over time — a 3% initial yield can become 10%+ in 20 years.
Frequently asked questions
What is a good dividend growth rate?
7–10% annual dividend growth is excellent. Companies like Johnson & Johnson and Procter & Gamble have achieved 6–8% dividend growth for 50+ years. Avoid chasing high yields with low growth.
Should I reinvest dividends or take the cash?
Reinvest until you need the income. DRIP (dividend reinvestment plans) accelerate compounding. Switch to taking cash when you retire or need passive income to cover expenses.
How accurate are the calculator results?
The math is exact — the same formulas a financial professional would use by hand. The precision of the output depends entirely on how realistic your inputs are. Use your actual numbers rather than estimates when possible. The defaults are reasonable starting points, but your real income, rates, and timeline will produce a different result.