Dividend Income Calculator
Toggle reinvestment on and off to see the difference it makes. Over a long horizon it is usually the largest single factor in the final figure, which is why total-return charts look so different from price-only charts.
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Reinvesting is where the compounding lives
Dividends taken as income are spent and gone. Dividends reinvested buy more shares, which pay more dividends, which buy more shares. Over decades this accounts for a very large share of the total return of the broad stock market — considerably more than price appreciation alone.
Switch reinvestment off and compare. The gap between the two is the compounding you gave up.
Yield on cost, and why it flatters
Yield on cost measures current income against what you originally paid. After twenty years of a growing portfolio it can look spectacular. It is a satisfying number and a poor decision tool: what matters for a decision today is the current yield on current value, because that is what your capital could be earning elsewhere.
A high yield is a warning as often as an opportunity
Yield is the dividend divided by the price. An unusually high yield frequently means the price has fallen because the market doubts the dividend is sustainable. Dividends are not contractual and can be cut at any time, and the cut usually arrives alongside a further fall in price.
Tax treatment differs
In a taxable account, dividends are generally taxed in the year received whether or not you reinvest them, which drags on the compounding this calculator shows. In a tax-advantaged account they compound untouched. The difference over decades is substantial.
Frequently asked questions
What is a good dividend yield?
Broad market yields have often sat in the low single digits. Yields well above that warrant investigation rather than enthusiasm — they frequently signal that the market expects the dividend to be cut.
Are dividends guaranteed?
No. A company can reduce or eliminate its dividend at any time, and many have. A long record of increases is a reassuring signal, not a promise.
Is dividend investing better than growth investing?
They are different routes to total return, not different qualities of return. What matters is total return after tax and fees; a preference for dividends is mostly about the psychology of receiving cash rather than selling shares.
Should I reinvest or take the income?
Reinvest while you are accumulating; take the income when you need it to live on. That is the whole decision.