Dividend Calculator

Dividend investing is a strategy that focuses on buying stocks, ETFs, or REITs that pay regular cash distributions (dividends) to shareholders. The appeal is generating a growing income stream from investments that also appreciate in value over time.

Dividend yield measures how much a company pays in dividends relative to its stock price: Yield = Annual Dividend Per Share ÷ Current Stock Price. A $50 stock paying $2/year has a 4% yield. Higher yield sounds better, but very high yields (above 6–8%) often signal risk — the stock price may have fallen because of financial trouble, making the high yield unsustainable.

Payout ratio is a critical sustainability indicator: dividends ÷ earnings. A 40% payout ratio means the company pays out 40% of earnings as dividends, retaining 60% for reinvestment. Sustainable payout ratios: under 60% for most companies, under 90% for REITs (which have special tax requirements). Payout ratios above 100% mean the company is paying more in dividends than it earns — unsustainable and often a cut-signal.

Dividend Reinvestment Plans (DRIP): automatically using dividends to purchase additional shares creates compound growth without requiring additional capital from you. Over long periods, DRIP can double or triple the total return compared to taking dividends as cash. Most major brokerages offer automatic DRIP with no fees.

Dividend Aristocrats are S&P 500 companies that have increased their dividend every year for at least 25 consecutive years — companies like Coca-Cola (60+ years), Johnson & Johnson (60+ years), and Procter & Gamble (66+ years). This consistency indicates deep financial health and shareholder-friendly management.

Tax treatment: qualified dividends (from US companies held for 60+ days) are taxed at preferential long-term capital gains rates (0%, 15%, or 20%). Non-qualified dividends are taxed as ordinary income. Dividends from REITs and foreign companies are typically non-qualified.