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Dividend Growth Rate Formula:
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The Dividend Growth Rate measures the annualized percentage rate of growth that a company's dividend undergoes over a period of time. It is a key metric for income investors evaluating the sustainability and growth potential of dividend-paying stocks.
The calculator uses the dividend growth rate formula:
Where:
Explanation: The formula calculates the percentage change between the next expected dividend and the current dividend, providing insight into the company's dividend growth trajectory.
Details: A consistent and growing dividend is often seen as a sign of a company's financial health and management's confidence in future earnings. Dividend growth rate helps investors assess the long-term income potential and compare different dividend-paying investments.
Tips: Enter both current and next dividend amounts in the same currency per share. Ensure values are positive and next dividend is typically higher than current for positive growth.
Q1: What is a good dividend growth rate?
A: A good growth rate depends on the industry and company maturity. Generally, 5-10% annual growth is considered healthy for established companies, while higher rates may indicate rapid growth phases.
Q2: Can dividend growth rate be negative?
A: Yes, if a company reduces its dividend, the growth rate will be negative, which may signal financial difficulties or strategic changes.
Q3: How often should I calculate dividend growth rate?
A: Typically calculated annually to track year-over-year changes, but can be calculated for any period to analyze dividend trends.
Q4: What factors affect dividend growth rate?
A: Company earnings, cash flow, payout ratio, industry conditions, and management's dividend policy all influence dividend growth.
Q5: Is high dividend growth always better?
A: Not necessarily. Unsustainably high growth rates may not be maintainable, while moderate but consistent growth often indicates better long-term stability.