Dividends are a simple way for investors to watch their portfolio grow. But once you’ve selected the right dividend stocks for your portfolio, it’s important to track them. This will let you understand how they are performing right now and how they will perform in the future based on the variables you select. Fortunately, there are analytical tools available to make calculating your projected dividend yield very simple.
Our latest tool is the MarketBeat dividend calculator. This requires you to provide some basic information which is readily available on equity’s individual stock page on MarketBeat.com. It will also require some assumptions on your part. Some of these you may be able to answer by looking at a company’s most recent earnings report.
Step 1: Select Your Investment Type
You can calculate dividend growth for individual stocks you own, or you can calculate a stock’s dividend yield as a percentage of the value of your entire portfolio. While this includes stocks that don’t pay dividends, calculating dividends this way gives you a percentage that tells you how well the dividend income of a given stock contributes to the value of your entire portfolio.
Step 2: Provide Information About the Particular Stock
Is it taxable? Select Yes or No. What is the distribution frequency? Many stocks pay a quarterly dividend. The tool also lets you select annual, semi-annual or monthly options (Note: The dividend calculator does not factor in special dividends since by their very nature they are irregular.). The other field lets you indicate if you plan on reinvesting the dividends as part of a dividend reinvestment plan (DRIP). Not all stocks do, but a DRIP is one of the easiest ways to enjoy the benefits of compounding.
Step 3: Provide Information About Your Investment Intentions
This includes three fields. First what is your starting balance? Next, how much, if anything, do you plan on contributing to the stock on an annual basis? This does not include reinvested dividends. The third field gives you the opportunity to select a length of time to measure. For example, if you are planning on retiring in 10 years, you may only want to see where the stock (or your portfolio) will be in 10 years. If you plan on this stock being a “forever” stock, you may choose a longer time horizon.
Step 4: Provide Information About the Stock’s Dividend
Here’s where you may have to make some assumptions. The last two fields, however, are essential to the accuracy of the calculator. The first is the average annual dividend yield for a particular stock. Because companies are usually very proud of their ability to issue dividends to their shareholders, this information can usually be found on a company’s web site under “Investor Relations” or a similar title. The last field is “Expected Increase % (per year)”. MarketBeat.com will show you a company’s recent dividend history. You may see, for example, that a company has increased their dividend by 0.25% every year for the past five years. Is that a guarantee they will do that again? No, but it does give you a reasonable assumption. Once a company starts not only issuing dividends, but increasing them, they will usually make continuing that pattern a priority. If they don’t, it could be an indication that the company is having financial problems.
The final word about using the dividend calculator
It may go without saying, but the results of the calculator are only as good as the data that you provide. Therefore you should be as accurate as possible with the information you provide. If you’re not going to be adding money to the account, don’t say you are. If you are not planning on reinvesting the dividend, don’t indicate that you are. If the dividend has not changed in several years, don’t assume the company will raise it in the future.
With that said, things change. Assumptions you make may change which means you may have to revisit the calculator to see whether an investment is still serving you well. There are many great dividend stocks that investors can buy and hold for years. But dividend stocks can fall out of favor. Above all else, that’s the reason why a tool like this exists to make it easy for you to get the information you need from a trusted source like MarketBeat.com.