See how your dividend income and yield on cost grow over time as companies raise their payouts — and how much faster with reinvestment. Free, no signup.
The dividend growth rate is simply how fast a company is raising its dividend per share. There are two versions worth knowing: the one-year rate, which tells you what just happened, and the compound annual growth rate (CAGR), which smooths several years into a single number you can project forward.
Growth Rate = (New Dividend − Old Dividend) ÷ Old Dividend × 100
Growth Rate = ((Ending Dividend ÷ Starting Dividend) ^ (1 ÷ Years) − 1) × 100
“Years” is the number of gaps between payments, not the number of figures you have. Ten calendar years of dividend data covers nine years of growth, so divide by 9. Use annual dividends per share throughout — comparing a quarterly payment to an annual one is the most common mistake here.
A company paid $1.00 per share in dividends five years ago and pays $1.61 today.
The dividend has compounded at about 10% a year. If the most recent raise was from $1.50 to $1.61, the one-year rate is ($1.61 − $1.50) ÷ $1.50 = 7.3% — slower than the five-year average, which is worth noticing. On a $1,000 position bought at a 3% yield, 10% dividend growth turns $30 of first-year income into roughly $78 after ten years without adding a dollar of new money.
Growth rates in the 5–10% range are the sweet spot for mature dividend payers: fast enough to beat inflation and lift your yield on cost, slow enough to be funded out of real earnings. Rates above 15% are usually a young dividend coming off a small base, or a catch-up raise, and rarely persist for a decade. A rate that has been decelerating year after year — 12%, then 8%, then 3% — often signals a payout ratio that has run out of room, which matters more than the headline yield. Pair the growth rate with the starting yield: a 2% yield growing 12% a year and a 5% yield growing 3% a year can end up in a very different place depending on your time horizon, which is exactly what the calculator above shows.
Dividend growth is the annual rate at which a company increases its dividend per share. A stock yielding 3% today that raises its dividend 8% a year pays far more on your original cost a decade later — that rising "yield on cost" is the engine of dividend-growth investing.
Established dividend growers typically raise payouts 5–10% a year. Dividend Aristocrats (25+ years of increases) often land in the 6–8% range. Very high growth rates (15%+) are usually early-stage and less sustainable.
Reinvesting dividends (a DRIP) buys more shares, which pay their own growing dividends — so income compounds on two fronts at once: more shares and higher per-share payouts. Over 20+ years the difference versus taking the cash is dramatic.
Yield on cost is your annual dividend divided by what you originally paid, not today's price. As the dividend grows, yield on cost climbs well above the market yield — a 4% starting yield can become 15%+ on cost after enough years of increases.
For a single year, dividend growth rate = (new annual dividend − old annual dividend) ÷ old annual dividend × 100. If a company raised its dividend from $1.00 to $1.08, that is ($1.08 − $1.00) ÷ $1.00 = 8%. Over several years use the compound annual growth rate instead: (ending dividend ÷ starting dividend) raised to the power of 1 ÷ number of years, minus 1.
Pull the annual dividend per share for each of the last five to ten years from the company's investor-relations dividend history or a broker's dividend tab, then run the CAGR formula on the first and last figures. Averaging the 3-, 5- and 10-year rates gives a steadier picture than any single year, and it exposes companies whose recent raises are much smaller than their older ones.