Most of the variables are self-explanatory, but here is a quick refresher of some key points:
Individual Stock or Portfolio – You can choose to enter data for an individual holding. Or, you can choose to make a calculation for an entire portfolio. For example, some investors will have an investment account specifically for dividend investments.
Distribution Frequency – Most dividend-paying stocks issue dividends on a quarterly basis. However, there are some instances where a company pays a monthly dividend or an annual dividend. This information is easily attainable.
DRIP – Most dividend-paying stocks offer the ability to reinvest through a DRIP. However, there are some that do not. Like the distribution frequency this information is easily attainable.
Annual Contribution – This is the amount that you will be adding to the portfolio. If you are making this calculation for an employer-sponsored tax-deferred account (e.g. 401k), you should include the total contribution from both you and your employer.
Dividend Tax Rate – Dividends can be either qualified or non-qualified. The tax rate on non-qualified dividends is the same as your regular taxable income. Qualified dividends are tax-free for individuals in the 10%, 12%, and 22% tax brackets. However, if you’re in the 22%, 24%, 32%, or 35% tax bracket, you will be subject to a taxable rate of 15%. And individuals in the 35% or 37% tax brackets will have a dividend tax rate of 20%.
Dividend Yield – This reflects the amount (in dollars) of a company’s current annual dividend per share divided by its current stock price. Because this number is based on current numbers, a dividend yield moves up and down frequently which is why it’s important to revisit the dividend calculator on a regular basis.
Expected Annual Dividend Amount Increase % (per year) – Many investors can see the amount a company has increased its dividend in one year (if any). If the company has a solid history of increasing its dividend, you may want to use their three-year average to provide a realistic barometer of future growth.
Expected Annual Share Price Appreciation % (per year): Share price appreciation or depreciation is a fluid number. Investors should use a conservative number based on the average of most dividend-paying stocks.
Years Invested - This is measured from the present day to the day you plan on needing the money. One of the benefits of using a dividend calculator is you can get an idea of how your investment may perform over different periods of time.