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Plan your path to financial freedom by estimating your dividend income over time. Use this calculator to visualize potential earnings and set realistic financial goals.
See how adjusting factors like your investment horizon and contributions can help you reach early retirement and achieve financial independence (FIRE).
Visualize the potential of compound interest as your wealth builds over time through dollar-cost averaging and dividend reinvestment.
The financial choices you make today can impact your loved ones for years to come. Invest consistently to build a legacy of security and opportunity for future generations.
Skip the hassle of manual calculations and complex spreadsheets. This tool streamlines the process, saving you valuable time and effort.
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Cash dividends is money paid to stockholders from a corporation's earnings or profits.
Special dividends are non-recurring cash dividends made by a company to its shareholders, separate from the typical dividend cycle.
Dividend frequency varies by company. Most pay quarterly, but some choose monthly, semi-annual, or annual schedules.
Dividend reinvestment plans, or DRIPs, are programs companies offer that let you reinvest your cash dividends back into more shares of the stock, automatically. Instead of pocketing the cash, you're getting more stock, which can be a smart move for compounding growth.
The dividend yield shows you how much a company pays out in dividends each year relative to its current stock price.
Example: If a company pays $2 in annual dividends per share and its current share price is $40, you can calculate the dividend yield like this:
Dividend growth (CAGR) shows you how much a company's dividend payments have increased each year over a specified period. It gives you a sense of how consistently the company's dividends are growing.
Example: If a company's dividend was \$1 per share five years ago and it's now \$1.50, you can calculate the CAGR like this:
To calculate capital appreciation, you'll need to make an educated estimate based on your portfolio allocation. A common benchmark is 7%. In general, if you're primarily invested in growth, expect higher appreciation; if focused on value and income, anticipate lower appreciation. You can refer to historical returns for similar portfolio allocations, such as Vanguard Portfolio Allocation Models, to gauge expected returns.
Yield on Cost (YoC) helps you see how much annual dividend income you're getting based on the original price you paid for your investment. This is especially useful if you're in it for the long haul and want to see how your dividends are stacking up over time. Here's how you figure out your YoC:
Example: Imagine you bought a stock at $20 a while back, and now it's paying you $1.50 per share each year in dividends. So for our example:
Dividend Kings are companies that have raised their dividends for 50 or more consecutive years.
Dividend Aristocrats are companies that have raised their dividends for 25 to 49 consecutive years.
Dividend Contenders are companies that have raised their dividends for 10 to 24 consecutive years.
Dividend Challengers are companies that have raised their dividends for 5 to 9 consecutive years.
The ex-dividend date is the date by which you must own the stock to receive the next dividend. Purchasing on or after this date means you won't get the upcoming dividend.
The payment date is the date the declared dividend is scheduled to be paid to investors.
The record date is cut-off date to determine which shareholders are entitled to the dividend.
The declaration date is the date when a company's board of directors announces the next dividend payment.
Form 1099-DIV tax form used to report dividend and distribution income to the IRS.
Qualified dividends enjoy a lower tax rate (0%, 15%, or 20% as of 2024) compared to the higher rates for ordinary income. To benefit from this favorable tax treatment, you need to meet a few key criteria.
Non-qualified dividends are taxed as ordinary income rather than at the capital gains rate, often including those from bonds and REITs.
A traditional IRA is a retirement savings account that offers tax advantages for your contributions. You contribute money that may be tax-deductible, meaning you could lower your taxable income for the year. The money you put in grows tax-deferred, so you don't pay taxes on it until you withdraw it in retirement. When you take out funds during retirement, you'll pay income taxes on those withdrawals. You generally have to start taking required minimum distributions (RMDs) from the account starting at age 73. Traditional IRAs are available through banks, investment firms, and online platforms, and they allow you to invest in a variety of assets. It's a solid choice if you want to reduce your current taxable income and are okay with paying taxes on your withdrawals later.
Note: Unlike employer-sponsored retirement plans like 401(k)s, traditional IRAs do not have employer matching. If your employer offers a 401(k) with matching contributions, it's generally advisable to contribute enough to get the full match before focusing on an IRA, as employer matches are essentially free money for your retirement.
A Roth IRA is a retirement savings account that offers you a unique tax advantage. Unlike traditional IRAs, with a Roth IRA, you contribute money that's already been taxed. This means your contributions grow tax-free, and when you withdraw the money in retirement, you don't pay any taxes on your earnings or withdrawals. You're free to withdraw your contributions at any time without penalty, which adds some flexibility, although there are rules around withdrawing earnings early. The account is typically available through banks, investment firms, and online platforms, allowing you to invest in a wide range of assets like stocks, bonds, and mutual funds. A Roth IRA is an excellent choice if you expect to be in a higher tax bracket in the future or want tax-free income in retirement.
A 401(k) is a retirement savings plan offered by your employer that lets you save for retirement with pre-tax dollars. This means you contribute money from your paycheck before taxes are taken out, which reduces your taxable income for the year. The money in your 401(k) grows tax-deferred, and you only pay taxes when you withdraw it in retirement. Many employers also offer a matching contribution, which is essentially free money added to your account. Contribution limits apply, and early withdrawals (before age 59½) can result in penalties and taxes. Within the plan, you can invest in options like stocks, bonds, and mutual funds. A 401(k) is a valuable tool for growing your retirement savings while benefiting from tax advantages.
A High-Yield Savings Account (HYSA), is a great option if you're looking to earn more interest on your savings compared to a regular savings account. You get a better annual percentage yield (APY), which means more interest on your money. The funds are easily accessible, although there might be limits on how often you can withdraw. Plus, your money is safe and insured, usually by the FDIC or NCUA. You can find HYSAs at both online and traditional banks, with online banks often offering the best rates. It's a smart way to grow your savings without taking on much risk.
The market data is sourced from Financial Modelling Prep.
While this forward-looking dividend reinvestment calculator is great for projecting potential future outcomes, it's not a substitute for thorough backtesting.
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