What is dividend growth investing?

Dividend growth investing focuses on companies and funds that raise their dividend per share year after year, rather than those with the highest current yield. A 3% yield that grows 8% a year produces far more income a decade later than a static 5% yield, and the rising payout helps offset inflation.

What is a realistic dividend growth rate?

Dividend Aristocrats — companies with 25+ years of consecutive increases — have historically grown dividends about 6–10% a year. Broad dividend-growth ETFs land in a similar range. Very high growth rates (15%+) are usually unsustainable and often reflect a company raising a tiny starting dividend.

How does reinvesting change dividend growth?

With reinvestment, each year’s dividends buy more shares, so your income grows from two engines at once: the rising dividend per share and your growing share count. Income then compounds at roughly (1 + growth rate) × (1 + yield) per year instead of just the growth rate — which is why long-term reinvested dividend growth is so powerful.

What is yield on cost?

Yield on cost is your current annual dividend divided by what you originally paid. As the dividend grows, your yield on cost rises even though the market yield on today’s price may stay flat. A 4% starting yield growing 7% a year reaches a yield on cost near 8% in about a decade.

How is this different from the reinvestment calculator?

The dividend reinvestment calculator is portfolio-value-first: it projects your total balance including price appreciation. This calculator is income-first: it isolates how your dividend income — and your yield on cost — grow over time, which is what dividend-growth investors actually optimize for.

Dividend Growth Calculator

Watch a rising dividend turn into rising income. Project your dividend income year by year — with or without reinvestment — and see your yield on cost climb.

Your dividend

Amount invested

Starting dividend yield

Annual dividend growth rate

% / yr

How fast the dividend per share rises each year. Dividend Aristocrats have averaged 6–10%.

Years to project

yrs

Reinvest dividends

Annual dividend income in year 20

$14,466

Income in year 1

$4,000

Total income collected

$163,982

Ending yield on cost

14.47%

Income each year

For educational purposes only. Dividend growth rates are assumptions, not guarantees. Pre-tax figures.

How the dividend growth calculator works

Year one income is simply amount invested × starting yield. After that, the dividend per share grows by your chosen growth rate, so without reinvestment your income rises at exactly that rate each year and your yield on cost climbs with it.

The model assumes a steadily-growing payer whose share price tracks its dividend, so the market yield stays roughly constant while the yield on your original cost rises. When you switch on reinvestment, each year’s dividends buy more shares at that higher price, adding a second compounding engine — income then grows at about (1 + growth) × (1 + yield) per year.

Yield on cost is measured against your original investment, the standard definition. For a projection that also includes share-price appreciation and your full portfolio balance, use the dividend reinvestment calculator.

Frequently asked questions

What is dividend growth investing?: Dividend growth investing focuses on companies and funds that raise their dividend per share year after year, rather than those with the highest current yield. A 3% yield that grows 8% a year produces far more income a decade later than a static 5% yield, and the rising payout helps offset inflation.
What is a realistic dividend growth rate?: Dividend Aristocrats — companies with 25+ years of consecutive increases — have historically grown dividends about 6–10% a year. Broad dividend-growth ETFs land in a similar range. Very high growth rates (15%+) are usually unsustainable and often reflect a company raising a tiny starting dividend.
How does reinvesting change dividend growth?: With reinvestment, each year’s dividends buy more shares, so your income grows from two engines at once: the rising dividend per share and your growing share count. Income then compounds at roughly (1 + growth rate) × (1 + yield) per year instead of just the growth rate — which is why long-term reinvested dividend growth is so powerful.
What is yield on cost?: Yield on cost is your current annual dividend divided by what you originally paid. As the dividend grows, your yield on cost rises even though the market yield on today’s price may stay flat. A 4% starting yield growing 7% a year reaches a yield on cost near 8% in about a decade.
How is this different from the reinvestment calculator?: The dividend reinvestment calculator is portfolio-value-first: it projects your total balance including price appreciation. This calculator is income-first: it isolates how your dividend income — and your yield on cost — grow over time, which is what dividend-growth investors actually optimize for.

Related calculators

Dividend Growth Rate Calculator

Measure the growth rate from history before you project it forward.

Dividend Reinvestment Calculator

Project total portfolio value with DRIP and price growth.

Yield on Cost Calculator

What your original purchase yields after years of growth.

Dividend Income Calculator

Current income from an investment at today’s yield.

Dividend Calculator

Yield, growth, and reinvestment in one projection.