Quick and Easy Dividend Calculators

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If you’ve been following my most recent series of posts then you are pretty well versed in dividends by now. You should know when a dividend will be paid by paying attention to the ex-date and payable date. You should also know about different types of distributions like capital gains. I want to take some time and dig a little deeper into the specifics of the numbers behind your passive dividend portfolio. Namely, how to calculate the growth of your dividend portfolio and how to measure the success of your passive dividend strategy.  This can be done using some quick and easy dividend calculators.

Dividend Calculators: Expected Growth of a Dividend Portfolio

Yield on Cost is a great measure for you if you reinvest your dividends and you want to know what the dividend yield is for your particular portfolio. In order to calculate this yield, you are going to need a few things. First you will want to determine the starting yield. You can usually find the dividend yield on the ticker summary page of Morningstar or Yahoo Finance. However, this yield is only going to apply to whatever the current price of the stock is, and you want the dividend yield when you first invested.

Dividend yield = The yearly total dividend divided by the stock price.

So when you calculate your starting yield you will want to use the dividend that was being paid when you first purchased the stock and the average share price when you purchased. You can find this information on an old statement or in your transaction history. There are even some brokers that will calculate this for you.

The second piece of information you will need is your dividend growth rate. You can use the forecasted rate but an easier and more concrete method would be to just use the historical growth rate.

Dividend Growth Rate = (New dividend-Old dividend) / Old Dividend

This is a simple formula for performance and it also can be used for the growth of the dividend. For example, if the dividend was 2.50 when you first bought the stock but now it’s 4.00, you would take the difference and divide it by the old dividend. In this case, (4.00-2.50)/2.50, which would give you a growth rate of 60%.

The dividend growth rate will give you an idea of how much the dividend will grow in the future, although, generally speaking, past performance is no guarantee of future performance. Ask any baby boomer you know and they can attest to that.

If you take your historical dividend yield and multiply it by 100, you will have your yield on cost. Then if you take the current dividend and multiply it by 1+ dividend growth rate, you can attempt to forecast next year’s yield on cost. Remember that your historical cost will always be the same unless you are frequently purchasing new shares.

Dividend Calculators: Passive Dividend Income Performance

The last quick and easy dividend calculator I have is a simple performance one. You’ve built up a nice dividend portfolio now and you might want to see how it’s doing, right? In order to calculate your performance, you can use the formula that I mentioned above for the growth rate. To arrive at the monthly return for your dividend portfolio you are going to need three pieces of information. The price at the end of the month, the price of the previous month, and the dividend paid.

Monthly Return = (New Price – Old Price + Dividend Paid)/ Old Price

So if you owned a stock that closed last month at 54.63, closed this month at 55.14 and paid a dividend of .55 you would arrive at the return by calculating (55.14 – 54.63 + 0.55) / 54.63. That would give you a return of 1.94%.

Whew! I’m not sure that was as quick and easy as I intended it to be. Do you keep up with the performance of your investments? Would you consider using yield on cost or another performance measure to estimate the success of your passive dividend portfolio?

This is a staff post from LaTisha who writes about investing for beginners, saving and money management for the young adult or recent grad at Financial Success for Young Adults. Visit YoungAdultFinances.com to see more from her.