What is dividend yield?

Dividend yield = Annual Dividend per Share ÷ Share Price × 100. A $2 annual dividend on a $50 stock = 4% yield. Yield changes as price changes — if the stock price falls, yield rises (same dividend / lower price).

What is yield on cost?

Yield on cost (YOC) uses your original purchase price instead of current price. If you paid $25/share and now receive $2/share dividend, YOC = 8%, even if current yield is only 4% at today's $50 price. YOC grows over time as companies raise dividends.

What is DRIP investing?

DRIP (Dividend Reinvestment Plan) automatically uses dividend payments to purchase additional shares. Over time this compounds returns: more shares generate more dividends, which buy even more shares. Many brokers and companies offer commission-free DRIP.

Are dividends taxable?

Yes. Qualified dividends (most US common stock dividends held >60 days) are taxed at 0%, 15%, or 20% depending on your income bracket. Ordinary dividends are taxed as regular income. Dividends in tax-advantaged accounts (IRA, 401k) are not taxed until withdrawal.

Dividend Calculator

Calculate annual dividend income, dividend yield, yield on cost, and per-period payouts. Optionally project future income with a dividend growth rate over a 10-year period.

Dividend Income Results

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Dividend Investing Basics

Dividend investing focuses on stocks or funds that pay regular income distributions. The dividend yield tells you what percentage of the stock price you receive back annually as dividends.

Dividend Reinvestment (DRIP)

Reinvesting dividends automatically purchases more shares, compounding your returns. A $10,000 investment at 4% yield growing at 7% annually becomes approximately $76,000 in 30 years without adding a cent — $42,000 more than without DRIP.

Key Metrics

Payout ratio: Dividends ÷ Earnings — should be under 75% for sustainability
Yield on cost: Current dividend ÷ your original purchase price
Dividend growth rate: How fast dividends increase each year
Ex-dividend date: Must own shares by this date to receive next payment

Frequently Asked Questions

What is a good dividend yield?

A yield between 2% and 5% is generally considered healthy for established companies. Yields above 6–7% can signal that the stock price has fallen sharply or that the dividend may be unsustainable. Always check the payout ratio — dividends consuming more than 80–90% of earnings are at higher risk of being cut.

How often are dividends paid?

Most US stocks pay quarterly dividends. Some pay monthly (common in REITs and certain ETFs), semi-annually, or annually. International companies often pay semi-annually or annually. Dividend ETFs typically pass through payments on their own schedule, which may differ from the underlying holdings.

What is a dividend reinvestment plan (DRIP)?

A DRIP automatically uses dividend payments to purchase additional shares of the same stock or fund, often commission-free and sometimes at a small discount. Over decades, reinvested dividends can account for the majority of total investment returns — the compounding effect becomes significant at long time horizons.

Are dividends taxed?

Qualified dividends — paid by US corporations or qualifying foreign companies on stock held for more than 60 days — are taxed at long-term capital gains rates (0%, 15%, or 20% depending on income). Ordinary dividends are taxed as regular income. Dividends inside a Roth IRA are never taxed; inside a Traditional IRA, taxes are deferred until withdrawal.