Calculators

Calculator: Pure Dividend Growth Stock Return Model

Dividend model expected return calculator

One of the most important inputs into retirement calculators is expected rate of return, and I am still surprised to see so few expected return calculators freely available on the internet. As an even simpler version of my earlier calculator, here is an expected return calculator for dividend stocks (or funds) that only requires four inputs:

  • Initial dividend yield – this is the percentage of your amount invested that you expect to get back within the first year via dividends. A backward looking (e.g. TTM) dividend yield number is often good enough if you don’t expect a significant change in the dividend from last year to this year.
  • Dividend growth rate – this is the hardest variable to predict, and the most important driver of long-term returns. Generally we expect this to follow profit growth, which we expect to follow revenue growth, which we expect to follow from turnover of invested (and reinvested) assets. In this calculator, we assume a constant annually compounded growth rate over our time horizon, and round to the nearest cent.
  • Final dividend yield – this variable makes the biggest difference to short-term returns (dividends don’t change day-to-day, but changes in the rate of dividend yield are one way of understanding day to day changes in stock prices), but this becomes a less significant factor over longer time horizons.
  • Time horizon – this calculator only lets you choose from a fixed list of a number of years, but enough to see the difference between shorter vs longer-term effects.

I’ve started calling this my “Model 1” or “D-Model” for stock returns. The below calculator can be read as the annual dividend and final amount in dollars per $100 invested. As always, this blog post and the below calculator are for illustration and discussion purposes only, and does not constitute investment advice of any kind.

Dividend stock expected return calculator

1st year dividend yield (%):
Dividend growth rate (%):
Final dividend yield (%):
Time horizon (years):
Saving now vs later: which adds up to more?
BVPS ROE Payout
10 10 50



Hopefully you find this calculator useful, if so, please do leave a comment below.

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