How to Use the Dividend Yield
Dividend yield tells you what you'd earn buying today, but "yield on cost" tells you what your original investment is actually paying you now — a number that grows every year a company raises its dividend. This calculator shows both, plus a multi-year income projection if the dividend keeps growing at your assumed rate.
Step-by-Step Guide
- 1
Enter the current share price of the stock.
- 2
Enter the annual dividend per share it currently pays.
- 3
Enter the number of shares you own.
- 4
Enter your average cost basis per share to calculate yield on cost.
- 5
Set an expected annual dividend growth rate based on the company's history.
- 6
Choose how many years to project income forward.
Dividend Yield Formula
Dividend Yield = (Annual Dividend Per Share ÷ Share Price) × 100 Yield on Cost = (Annual Dividend Per Share ÷ Cost Basis Per Share) × 100 Projected Dividend = Current Dividend × (1 + Growth %)^Years
Worked Example
Share price: $60. Dividend: $2.40/share. Shares: 200. Cost basis: $45/share. Growth: 6%/yr, 10-year projection. Dividend Yield = $2.40 ÷ $60 = 4.0% Yield on Cost = $2.40 ÷ $45 = 5.3% Annual Income Today = $2.40 × 200 = $480 Projected Dividend in 10 yrs = $2.40 × (1.06)^10 ≈ $4.30 Projected Annual Income = $4.30 × 200 ≈ $860
Understanding your result
Calculator results depend entirely on the information entered. For the most useful estimate, use current and accurate figures and include all costs that apply to your specific situation.
Frequently Asked Questions
What is a good dividend yield?
It depends on the sector — utilities and REITs often yield 4–6%, while growth stocks may yield 0–2% but grow dividends faster. Very high yields (8%+) can signal financial trouble, so check the payout ratio and dividend history before assuming it's sustainable.
What is yield on cost?
Yield on cost divides the current dividend by what you originally paid per share, not the current price. It shows the real income return on your initial investment and rises over time as dividends grow.
Does dividend growth compound like reinvested dividends?
This calculator projects the dividend payment growing, not necessarily reinvestment. If you reinvest dividends to buy more shares (DRIP), your actual income growth will be faster than the raw dividend growth rate alone.
What is a dividend payout ratio?
The payout ratio is dividends paid divided by net income (or free cash flow). A payout ratio consistently above 80–100% can signal the dividend is at risk of being cut, especially if earnings decline.
Are dividends taxed differently than capital gains?
Qualified dividends in the US are typically taxed at the same favorable rates as long-term capital gains, while non-qualified/ordinary dividends are taxed as regular income. Rules vary by country — consult a tax professional.