How do you calculate dividend income?

Multiply the amount invested by the dividend yield. $10,000 in a stock or fund yielding 3.5% pays about $350 a year, or $29.17 a month. The same thing per share: the number of shares times the annual dividend per share.

What is a dividend yield?

The annual dividend per share divided by the share price. A stock paying $2 a year that trades at $50 yields 4%. When the price falls the yield rises, which is why an unusually high yield can be a warning sign rather than a bargain.

How much do I need to invest to make $1,000 a month in dividends?

Divide the $12,000 a year you want by the yield: $400,000 at 3%, $300,000 at 4% and $240,000 at 5%. That's before tax; if your dividends are taxed at 15%, you'd need about 18% more to net $1,000.

What is a DRIP, and is reinvesting worth it?

A dividend reinvestment plan automatically uses each dividend to buy more shares, which then pay their own dividends. In the calculator's default example, reinvesting turns $130,000 of contributions into about $320,000 after 20 years, against $225,000 plus $56,000 of cash dividends if you take them.

Are reinvested dividends still taxed?

Yes. In a regular brokerage account, reinvested dividends are taxable in the year they're paid, just like cash dividends. In an IRA or 401(k) they aren't taxed until you withdraw (or at all, in a Roth), so set the tax rate to 0 for those accounts.

What is a good dividend yield?

It depends on what you own. Broad stock market indexes have yielded around 1% to 2% in recent years, while utilities, REITs and dividend-focused funds often yield 3% to 5%. Yields far above that usually mean the market expects a dividend cut.

Dividend Calculator: Income, DRIP and Yield

Dividends are the part of a company’s profit it pays out to shareholders, usually every quarter. They’re the closest thing investing has to a paycheck. This calculator answers the two questions most dividend investors ask. How much income does my money pay now, and how much will it pay later, especially if I reinvest the dividends instead of spending them?

Dividend formulas: annual dividend income equals investment times yield, and future portfolio value equals starting value times one plus R to the n, plus contributions, where R is price growth plus yield times one minus the tax rate when dividends are reinvested — Dividend income today, and portfolio growth with reinvested dividends

Dividend income today

The starting point is the dividend yield — the annual dividend per share divided by the share price:

Your annual income is simply the amount invested times the yield. With $10,000 in a fund yielding 3.5%:

That’s about 29 dollars a month. Most US companies pay quarterly, so in practice it arrives as four payments of about 87.50 dollars.

How reinvesting makes dividends compound

If you reinvest your dividends, through your broker’s DRIP option or by buying more shares yourself, each payment buys shares that pay dividends of their own. After tax, the portfolio then grows each year at the share price growth plus the reinvested yield:

where is the yield and the tax rate on dividends. If you take the dividends as cash, the portfolio grows at just . With a starting value and a contribution added each year, the value after years is:

Worked example: $10,000 plus $6,000 a year for 20 years

The calculator’s defaults: $10,000 to start, $6,000 added every year, a 3.5% yield, 5% share price growth and a 15% tax rate on dividends.

Step 1 — growth rate with reinvestment.

Step 2 — value after 20 years.

Step 3 — income by then. At the same 3.5% yield, that portfolio pays $11,207.24 a year, about $934 a month. That’s 32 times the $350 it paid in year one. In total you’d have received $83,476 of dividends along the way, all reinvested.

Step 4 — the same money, taking the cash. Without reinvesting, the portfolio grows at 5% and ends at $224,928.70, paying $7,872.50 a year. You’d have pocketed $56,482.58 of after-tax dividends over the 20 years. Even adding that cash back, you finish about $39,000 behind the reinvesting investor.

Line chart of portfolio value over 20 years: reinvesting dividends reaches 320,207 dollars, taking them as cash reaches 224,929 dollars, from 130,000 dollars of contributions — Reinvesting widens the gap every year

Dividend Calculator worked example diagram — A visual read of the worked example above — the same numbers the calculator returns for its default inputs.

How much you need for a dividend income goal

Turn the yield formula around to find the portfolio needed for a target income:

Monthly income wanted	At 3% yield	At 4% yield	At 5% yield
$500	$200,000	$150,000	$120,000
$1,000	$400,000	$300,000	$240,000
$2,000	$800,000	$600,000	$480,000
$5,000	$2,000,000	$1,500,000	$1,200,000

These are before tax. A higher yield needs less money, but it usually comes with less growth, or more risk of a cut.

How dividends are taxed

In a regular brokerage account, dividends are taxed in the year they’re paid, even if they’re reinvested. Qualified dividends, from US companies and many foreign ones held for more than 60 days around the ex-dividend date, get the long-term capital gains rates. For 2026 those are 0% on taxable income up to $49,450 (single) or $98,900 (married filing jointly), 15% up to $545,500 or $613,700, and 20% above. Ordinary dividends, including most REIT distributions and interest-like payouts, are taxed at your regular income tax rate. Higher earners may also owe the 3.8% net investment income tax.

Inside an IRA, 401(k) or other tax-advantaged account, dividends aren’t taxed as they’re paid. For those, set the tax rate to 0.

Watch out for yield traps

A very high yield is often a sign that the share price has fallen because investors expect the dividend to be cut. When that happens you lose on both the price and the income. Check how much of its earnings the company pays out (the payout ratio). Look at whether its dividends have kept pace over the last decade, not just at this year’s yield.

Common mistakes

Assuming the yield stays fixed while the price soars. If the dividend doesn’t grow with the price, the yield falls. This calculator assumes the two grow together.
Forgetting the tax on reinvested dividends. It’s due each year even though you never see the cash.
Comparing a DRIP with spending the dividends. The fair comparison adds back the cash you took, as in the worked example.
Chasing the highest yield. Total return — price growth plus dividends — is what builds wealth.

Projections only. Real dividends, prices and tax rates change from year to year, and past yields don’t guarantee future income.

Sources and assumptions

This calculator assumes:

The dividend yield and the share-price growth rate stay constant.
Contributions are added once a year at the end of the year.
One flat tax rate applies to dividends; brokerage fees are not included.

Sources:

Topic no. 404, Dividends, Internal Revenue Service
About Form 8960, Net Investment Income Tax, Internal Revenue Service
Tax inflation adjustments for tax year 2026, Internal Revenue Service

Figures last reviewed: 5 October 2026. Educational estimates, not professional advice.

About the formula: The model works in whole years. Each year the portfolio pays dividends equal to the yield times its value at the start of the year, the share price grows by the growth rate, and your contribution is added at the end of the year. With DRIP, the after-tax dividends buy more shares, so the portfolio grows at price growth + yield × (1 − tax rate). The yield is assumed constant, which means dividends per share grow as fast as the share price.

Dividend Calculator