Dividend Yield Calculator
Dividend yield tells you how much income a stock generates per dollar invested. A 4% yield on a $50,000 portfolio generates $2,000/year in dividends. This calculator also projects your yield-on-cost as dividends grow over time.
Enter the stock price, annual dividend, and investment amount to see your yield, projected income, and how dividend growth builds your yield on cost over 10 years.
Understanding Dividend Yield — and Its Limits
Dividend yield is simply annual dividends per share divided by the stock price. It's the most immediate measure of income return from a dividend stock — analogous to the interest rate on a savings account. A 4% yield means you receive $4 in dividends for every $100 invested (before taxes).
But yield alone is incomplete. A 7% yield on a stock whose price has fallen 30% may indicate the dividend is at risk of being cut. A 2% yield on a company that grows its dividend 12% annually will produce a much higher yield on your original cost within a decade. The best dividend investments combine reasonable current yield with consistent dividend growth and a sustainable payout ratio.
Yield on Cost: Why Dividend Growth Matters More Than Current Yield
Yield on cost (YOC) is what makes dividend growth investing powerful. If you buy a stock at $50 paying $2/year (4% yield), and the company grows its dividend 7% annually, after 10 years the annual dividend is $3.93/year. Your YOC is $3.93 ÷ $50 = 7.9% — nearly double the original yield, on the same original cost basis. After 20 years at 7% growth: $7.74/year, a 15.5% YOC. This compounding effect rewards patient dividend growth investors significantly.
| Current Yield | Year 1 Income | Year 10 Income (5% growth) | Year 10 Income (10% growth) |
|---|---|---|---|
| 2% | $200 | $326 | $519 |
| 3.5% | $350 | $570 | $908 |
| 5% | $500 | $815 | $1,297 |
| 7% | $700 | $1,141 | $1,816 |
Key Metrics Beyond Yield
Payout ratio: What percentage of earnings is paid as dividends. Under 60% is generally sustainable; above 80% may be at risk if earnings decline. Dividend growth rate: How fast the company increases its dividend annually. Consistent growth (10+ years) signals financial health. Dividend coverage ratio: Earnings per share ÷ dividends per share. Above 1.5× is considered healthy. Free cash flow yield: Especially for REITs and MLPs — dividends supported by FCF are more sustainable than those from earnings alone.
For a strategy guide on building a dividend income portfolio, read dividend investing strategy. For how to evaluate whether a specific dividend stock is worth buying, see how to evaluate dividend stocks.
Frequently Asked Questions
What is dividend yield?
Dividend yield = Annual dividends per share ÷ Current stock price × 100. A $50 stock paying $2/year has a 4% dividend yield. It's the income return on a stock investment, analogous to the interest rate on a bond or savings account.
What is a good dividend yield?
Income investors typically target 3%–5%. The S&P 500 average is ~1.3%–1.5%. Above 6%–8% may indicate a high-payout business model (REITs, utilities) or a dividend at risk of being cut. Always evaluate yield alongside payout ratio and dividend growth history.
What is yield on cost?
Yield on cost (YOC) is the dividend yield calculated on your original purchase price, not the current price. If you bought a stock at $30 with a $1 dividend (3.3% yield) and dividends grow to $2/year, your YOC is 6.7% — showing how dividend growth rewards long-term holders.
What is a payout ratio?
Payout ratio = Annual dividends ÷ Earnings per share × 100. Under 60% is generally sustainable. Above 80% may indicate limited growth capacity or dividend cut risk. REITs use funds from operations (FFO) instead of earnings for payout ratio assessment.
Are dividends taxable?
Yes. Qualified dividends (most US stock dividends held 60+ days) are taxed at long-term capital gains rates (0%, 15%, or 20%). Non-qualified dividends (some foreign stocks, REITs, money market funds) are taxed as ordinary income. Tax-advantaged accounts (Roth IRA, 401k) eliminate current-year dividend taxes entirely.
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