Dividend Calculator: Returns and Taxes on Reinvested Dividends
Our dividend calculator can estimate your long-term returns and tax liability on a dividend stock, assuming dividends are reinvested.
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Dividend stocks are popular among investors for a reason. In addition to potentially rising in price, they provide income in the form of regular dividend payments. If those dividends are reinvested in the stock, they can compound your returns.
One small downside of this kind of investing is the complexity of the math behind it. To calculate your total return on a dividend stock investment, and how much you’ll owe to the government, you’ll need to account for stock price growth, dividend yield, dividend frequency, taxes, holding period and more.
Our dividend calculator can make this easier. Just fill out the fields below for an estimate of your total returns and investment taxes from a dividend stock investment.
» See our list of the best brokers for dividend investing.
How to use NerdWallet’s dividend calculator
Enter your initial investment amount. If you don’t know the dollar amount you intend to invest, you can multiply the price of the stock in question by the number of shares you intend to buy.
Enter your holding period in years. This calculator assumes that you will hold the dividend stock in question for at least one year. A shorter holding period may incur short-term capital gains tax rates, which are usually higher than long-term rates. It also may make you ineligible to receive the dividend. But you don’t need to enter a whole number — 7.5 years is acceptable, for example.
Enter the stock’s annual dividend yield. You can find this information by googling the stock’s ticker symbol, or by looking it up on a financial data website such as Finviz or Yahoo Finance.
Enter your best guess of the stock’s annual percentage increase in price. The average stock market return, as measured by the S&P 500 index over the last century, is about 10% per year, not accounting for inflation. You can use that number as a baseline, or enter 0% if you want to see your potential gains from dividend payments alone.
Choose your dividend payment frequency. Some dividend stocks pay dividends annually. Others pay out twice a year or quarterly, and a few are monthly dividend stocks. Dividend frequency determines the rate at which your investment is compounded, which can affect your returns.
Choose your dividend tax rate. This calculator assumes that the dividend in question is a qualified dividend. That’s a dividend paid by a company that trades on a major U.S. stock exchange, to a long-term shareholder. Qualified dividends are taxed at 0%, 15% or 20%, depending on your adjusted gross income (AGI) and tax filing status.
Choose your long-term capital gains tax rate, if applicable. Capital gains taxes are only due upon the sale of an investment within a taxable brokerage account. Long-term rates are typically 0%, 15% or 20%, depending on AGI and filing status. Long-term capital gains tax brackets overlap very closely with qualified dividend tax brackets, although they are not completely identical. You can select N/A if you don’t intend to sell the stock at the end of the holding period.
Click “Calculate.” This will reveal your pre-tax ending balance and total return, which is the balance and return you’ll get if you’re investing within a tax-advantaged account such as a 401(k) plan or 529 plan. It’ll also reveal your after-tax ending balance, after-tax total return and the total federal tax due on your investment, which you’ll need to pay if you’re investing within a taxable brokerage account.
» Check out some of the all-around best brokerage accounts for stock trading.