What is the dividend growth rate?

The dividend growth rate (DGR) is the compound annual rate at which a company has raised its dividend per share. If a dividend grew from $1.00 to $2.50 a share over ten years, it compounded at about 9.6% a year — that 9.6% is the dividend growth rate.

How do you calculate the dividend growth rate?

Use the compound annual growth rate (CAGR) formula: (ending dividend ÷ starting dividend) raised to the power of (1 ÷ number of years), minus 1. For a single year it simplifies to the plain percent change between the two payments.

What is a good dividend growth rate?

It depends on the company. Mature, high-yield payers often grow dividends 2–6% a year, roughly tracking inflation, while faster-growing companies with lower starting yields can compound 8–15%+. There is no universal “good” number — a higher growth rate usually comes with a lower current yield, and vice versa.

How is this different from the dividend growth calculator?

This page measures a rate from history — you already know the old and new dividend and want the growth percentage. The dividend growth calculator does the opposite: you supply a growth rate and it projects the future dividend and income. Measure the rate here, then project it there.

How many years of history should I use?

Five and ten years are the most common windows. A longer window smooths out one-off raises and freezes and gives a more durable rate; a shorter, recent window better reflects a company that has sped up or slowed down its increases. Comparing both is often more telling than either alone.

Why does the dividend growth rate matter?

It is the engine behind income compounding. A modest starting yield that grows steadily can overtake a higher static yield within a decade, and the growth rate (g) is the key input in the Gordon dividend discount model used to value dividend stocks.

Dividend Growth Rate Calculator

Turn a starting and ending dividend into the compound annual growth rate — the DGR that drives income compounding and stock valuation.

The two dividends

Annual dividend — start of period

Annual dividend — end of period

Years between the two figures

Dividend growth rate (compound annual)

9.60%

Total growth

150.00%

Growth multiple

2.50×

Over

10 years

What this rate means

The dividend grew from $1.00 to $2.50 a share over 10 years — a 2.50× increase, or 9.60% compounded every year. That is the historical growth rate; whether it continues is the real question, so treat it as a starting assumption, not a forecast.

For educational purposes only. A historical growth rate is not a forecast — past dividend increases do not guarantee future ones. Not financial advice.

How the dividend growth rate is calculated

The calculator uses the compound annual growth rate (CAGR): (ending dividend ÷ starting dividend)^{1 / years} − 1. A dividend that rose from $1.00 to $2.50 over ten years multiplied by 2.5×, which works out to about 9.6% compounded every year — not 15% (the simple average), because compounding does part of the work.

Over a single year the formula collapses to the plain percent change, so you can also use it to find the growth between two consecutive annual dividends. A dividend that was cut produces a negative rate; one that was eliminated shows −100%.

Once you have the rate, feed it into the dividend growth calculator to project future income, or into the dividend discount model as the growth input (g) to estimate a fair price. The growth rate is also what separates a low-yield compounder from a high-yield static payer over time — see the yield on cost calculator.

Frequently asked questions

What is the dividend growth rate?: The dividend growth rate (DGR) is the compound annual rate at which a company has raised its dividend per share. If a dividend grew from $1.00 to $2.50 a share over ten years, it compounded at about 9.6% a year — that 9.6% is the dividend growth rate.
How do you calculate the dividend growth rate?: Use the compound annual growth rate (CAGR) formula: (ending dividend ÷ starting dividend) raised to the power of (1 ÷ number of years), minus 1. For a single year it simplifies to the plain percent change between the two payments.
What is a good dividend growth rate?: It depends on the company. Mature, high-yield payers often grow dividends 2–6% a year, roughly tracking inflation, while faster-growing companies with lower starting yields can compound 8–15%+. There is no universal “good” number — a higher growth rate usually comes with a lower current yield, and vice versa.
How is this different from the dividend growth calculator?: This page measures a rate from history — you already know the old and new dividend and want the growth percentage. The dividend growth calculator does the opposite: you supply a growth rate and it projects the future dividend and income. Measure the rate here, then project it there.
How many years of history should I use?: Five and ten years are the most common windows. A longer window smooths out one-off raises and freezes and gives a more durable rate; a shorter, recent window better reflects a company that has sped up or slowed down its increases. Comparing both is often more telling than either alone.
Why does the dividend growth rate matter?: It is the engine behind income compounding. A modest starting yield that grows steadily can overtake a higher static yield within a decade, and the growth rate (g) is the key input in the Gordon dividend discount model used to value dividend stocks.

Related calculators

Dividend Growth Calculator

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Dividend Discount Model Calculator

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Yield on Cost Calculator

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Dividend Calculator

Project growth with yield, reinvestment, and tax.