Dividend calculator

How do you calculate dividend income?

Multiply three numbers: shares held x dividend per payment x payments a year. That gives the yearly income before tax. Divide by the number of payments for each payment, or by 12 for a monthly average.

The default inputs describe 200 shares priced at $50 that pay $0.50 a share each quarter. The yearly dividend per share is $0.50 x 4 = $2.00, so the holding earns $400 a year, paid as four amounts of $100, or $33.33 a month on average. The holding is worth $10,000, so the income is 4% of its current value.

Use the tabs above for the other two questions people ask: what an amount you have not yet invested would pay, and how much you would need to invest for a set monthly income.

What is the dividend yield formula?

Dividend yield = yearly dividend per share / share price, shown as a percentage. With $2.00 a year and a $50 price, the yield is 4%.

Because the price sits underneath, the yield moves every time the price does, even when the company changes nothing. Holding the $2.00 dividend fixed:

Published yields differ in which dividend they use. A trailing yield uses the dividends paid over the last 12 months; a forward yield uses the most recent payment multiplied up to a year, or a declared annual rate. This calculator uses whichever per-payment figure you type, times the number of payments, so the yield it shows is as current as the dividend you enter.

What is yield on cost, and how is it different?

Yield on cost divides the same yearly dividend by the price you paid instead of today's price. Someone who bought the default shares at $40 earns $2.00 a year on each, a yield on cost of 5%, while a buyer today at $50 gets 4% from the same payment.

Yield on cost tells you what your original money now earns, and it rises as a company increases its dividend. It says nothing about whether the shares are good value today: the market price, not your purchase price, is what you could sell for, so the current yield is the figure to compare against other holdings. If you bought at several prices, enter the average cost per share.

How much do you need to invest for $500 a month in dividends?

Divide the yearly income you want by the yield. $500 a month is $6,000 a year, and at a 4% yield that needs $150,000 invested. The Income I want tab does this for any amount, price and dividend. The yield makes a large difference:

Tax raises the figure. If 15% is taken from each dividend, a 4% yield nets 3.4%, and $6,000 a year after tax needs $176,470.59. For $1,000 a month at 4% before tax, the amount is $300,000. A higher yield needs less capital on paper, but a high yield can come with a dividend that is less secure, which the section on yield traps below covers.

Monthly, quarterly or twice a year: does the payment schedule matter?

The schedule changes when the cash arrives, not how much arrives in a year. Payment habits differ between markets and between companies: quarterly, twice-yearly and yearly schedules are all common, and some funds pay monthly. Two examples in other currencies:

• Pounds, twice a year. 1,500 shares at £4.20, paying 9.5p a share twice a year, earn £285 a year as two payments of £142.50, or £23.75 a month on average. The yield is 4.52%. Bought at £3.60, the yield on cost is 5.28%.
• Euros, monthly. €25,000 invested at €32.50 buys 769.23 shares. At €0.11 a share each month, they pay €84.62 a month and €1,015.38 a year, a yield of 4.06%.

The bar chart beside the result shows each payment through one year. A twice-yearly payer can split the year unevenly between the interim and final dividend; enter the yearly total divided by two, or run the calculator once for each payment.

How are dividends taxed, and what does withholding mean?

Dividends are usually taxable income, and the rules depend on where you live, where the company is based and the account the shares sit in. When a company pays shareholders in another country, its home country often withholds tax at source before the money arrives. Tax treaties between countries can reduce that rate, and some countries let you credit tax withheld abroad against tax due at home. Some accounts, such as tax-advantaged retirement or savings wrappers in several countries, shelter dividends from tax at home; withholding abroad may still apply.

Because the right rate is personal, the calculator does not fill one in. Under Tax on dividends, enter one flat percentage and it is taken off every payment: at 30%, the default $400 a year becomes $280. For the tax itself, the dividend tax calculator works through allowances and rates for specific countries, and our guide to dividend tax in the UK and US explains the main rules.

When is a high dividend yield a warning sign?

A yield jumps when the price falls, and a price can fall because the market expects the dividend to be cut. Take the default shares: if the price drops from $50 to $30 while the last dividend stays at $2.00, the yield looks like 6.67%. If the company then halves the payment to $1.00, the yield at $30 is 3.33%, and the shareholder has lost both income and capital.

That is why a yield is a starting point, not a conclusion. The checks that follow look at the business: how much of its profit the dividend uses, whether cash flow covers it, and how much debt it carries. Dividend yield explained: when a high yield is a trap and the dividend payout ratio explained go through them.

Who receives a dividend? The key dates

A company announces a dividend on its declaration date, with the amount and the dates that follow. To receive it, you need to own the shares before the ex-dividend date; buy on or after that date and the seller receives the payment. The record date is when the register of shareholders is checked, and the payment date is when the cash arrives. Shares often open lower on the ex-dividend date by roughly the amount of the dividend, since a buyer that day no longer gets it. How dividends work: the four dates that get you paid walks through an example.

Common dividend calculation mistakes

• Treating a quarterly dividend as yearly. $0.50 a quarter is $2.00 a year; using $0.50 as the annual figure understates the yield by three quarters.
• Comparing yields from different dates. A yield quoted last month used last month's price.
• Adding a special dividend to the regular rate. A one-off payment lifts the trailing yield for a year without saying anything about the next one.
• Ignoring tax and currency. A dividend paid in another currency is converted at the rate on the payment date, and tax may be withheld before it reaches you.
• Judging a share by yield on cost. It describes your history, not today's value.

What this calculator leaves out, and a glossary

It takes the dividend you enter and assumes it continues at that rate. Companies can raise, cut or stop dividends at any time, and nothing here predicts which. It ignores dealing costs, currency conversion and reinvestment; to see what reinvesting every payment does over many years, use the DRIP calculator.

Dividend per share: the cash paid on each share for one payment. Dividend yield: yearly dividend per share divided by the share price. Yield on cost: yearly dividend per share divided by the price you paid. Trailing yield: based on the last 12 months of payments. Forward yield: based on the current rate carried forward a year. Ex-dividend date: the first day a buyer does not receive the next payment. Withholding tax: tax deducted at source before a dividend is paid out.

Frequently asked questions

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