Dividend Growth Calculator

Dividend growth calculator projects future dividend income from companies that consistently raise payouts. It applies the constant growth model: projected dividend = current dividend × (1 + G/100)^n. It also reports a Gordon Growth Model valuation, which divides next year's dividend by the gap between the required return and the growth rate.

Example: 100 annual dividend, 7% growth, 10 years projection. Year 10 dividend = 100 × 1.07^10 = 196.72, close to double the starting figure. The dividends received across those ten years sum to 1,478.36. Gordon value at a 9% required return: 100 × 1.07 / (0.09 − 0.07) = 5,350. That figure is the value of the income stream on the same basis as the dividend entered: per share if the dividend was per share, whole-holding if it was a total.

Screens in several markets track companies with long unbroken records of raising their payout, commonly twenty-five consecutive years or more. Constituents tend to be mature businesses in consumer staples, utilities and industrials, where earnings are steady enough to support an increase through a full cycle. A long record describes what a company has done rather than what it will do; this model holds whatever growth rate is entered constant for the whole projection.

A worked example

With the defaults: current annual dividend of 100, annual growth rate of 7%, years to project of 10 years, required return of 9%. The tool returns 196.72.

What moves the number most

The projection responds to Current Annual Dividend, Annual Growth Rate %, and Years to Project. The starting dividend scales the answer one for one, while the rate and the horizon compound, so a percentage point on the rate outweighs the same proportional change to the starting dividend once the projection runs past a few years. Required Return % does not enter the projection at all. It appears only in the valuation row.

Why the valuation row moves so far on small changes

The Gordon figure divides next year's dividend by the gap between the required return and the growth rate, so the size of that gap sets the sensitivity rather than the size of either rate. On the default figures the gap is two percentage points. Lifting the growth rate by one point narrows it to one and roughly doubles the value, to 10,800. Lifting the required return by one point widens it to three and cuts the value by a third, to 3,566.67. As the two rates converge the figure grows without limit, which is why the model is applied to payers whose growth is expected to stay well below a plausible required return. The dividend behaves differently from the two rates: it scales the value one for one at any spread, so 10% more dividend is 10% more value. The rates do not. Measured like for like, a 1% relative change in the required return moves the value more than the same relative change in the dividend at every positive growth rate, while the growth rate only overtakes the dividend above about 4.4% against a 9% required return. A value computed on a narrow spread therefore carries more of the assumption than of the payout it was built from.

The formula behind this

Projected dividend = current dividend × (1 + G/100)^n, where G is the growth rate in percent and n the number of years. Gordon value = current dividend × (1 + G/100) / (R/100 − G/100), where R is the required return in percent.

Where this fits in planning

This is a "what-if" tool, not a forecast. It helps to test ideas: what happens to the result as the Current Annual Dividend or the Annual Growth Rate % changes. Running several sets of figures shows how sensitive the result is to each input; a single set does not.