How to Calculate Dividend Growth Rate

The dividend growth rate of a stock is the percentage increase in dividends for a certain period of time.

Learn how to calculate dividend growth rate with the following examples:

Example 1:
In Year 1, the company paid a dividend of $2.70 per share. In Year 2, it increased the dividend payment to $2.90 per share. Thus, the change in dividends = 2.90 - 2.70 = $0.20, and then you simply divide the change in dividends by the older dividends per share to get the dividend growth rate:
(0.20 / 2.70) * 100% = 7.4%

Example 2:
ABC Company has been consistently raising its dividend payments for over the past 4 years:
2007 - $0.80
2008 - $0.90
2009 - $0.98
2010 - $1.05
Calculate the dividend growth rate for 2008, 2009 and 2010.

Solution:
Year 2008 = (0.90 - 0.80) / 0.80 = 12.5%
Year 2009 = (0.98 - 0.90) / 0.90 = 8.9%
Year 2010 = (1.05 - 0.98) / 0.98 = 7.1%

* Next: How to Calculate Preferred Dividends
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