Dividend Calculator

Dividend investing is a strategy focused on building a portfolio of stocks that pay regular dividends, providing a steady stream of passive income. Dividends are portions of a company's profits distributed to shareholders, typically paid quarterly.

The power of dividend investing comes from two sources: the regular income from dividend payments and the potential for dividend growth over time. Many established companies increase their dividends annually, providing investors with growing income that can help combat inflation.

Dividend yield is calculated by dividing the annual dividend per share by the stock price, expressed as a percentage. For example, if a stock trades at $100 and pays $4 in annual dividends, the dividend yield is 4%.

A Dividend Reinvestment Plan (DRIP) automatically uses dividend payments to purchase additional shares of the stock, rather than receiving cash. This creates a powerful compounding effect over time, as you earn dividends on an ever-growing number of shares.

Dividend growth investing focuses on companies that consistently increase their dividend payments over time. These companies typically have strong business models, stable cash flows, and a commitment to returning value to shareholders.

Dividend income is taxable, but the tax treatment depends on whether dividends are classified as qualified or non-qualified (ordinary). Understanding the tax implications is important for maximizing after-tax returns.

A well-constructed dividend portfolio balances current income with growth potential, diversifies across sectors, and focuses on companies with sustainable dividend policies.