Dividend Growth Rate Calculator
The dividend growth rate (DGR) measures how quickly a company's dividend payments have grown over time. Dividend growth investors use this metric to assess the quality and sustainability of income streams. The compound annual growth rate (CAGR) formula smooths out year-to-year variation to give the steady annual rate that would produce the same result. Enter the starting and ending dividend per share and the number of years to calculate the historical DGR, then project the future dividend at that same rate.
Dividend growth rate formula (CAGR)
DGR = (Ending Dividend / Starting Dividend)^(1 / Years) - 1
Projected Dividend = Ending Dividend * (1 + DGR)^Projection Years
Total Growth = (Ending Dividend / Starting Dividend) - 1
CAGR stands for Compound Annual Growth Rate. It gives the single constant annual rate that, applied each year, transforms the starting dividend into the ending dividend over the specified number of years.
Using dividend growth rate in analysis
- Consistent dividend growth over 10 or more years signals strong earnings power and shareholder commitment.
- Compare the DGR against inflation: a 2% DGR in a 3% inflation environment means real dividend income is falling.
- The Gordon Growth Model uses DGR to estimate fair value: Fair Value = Next Year Dividend / (Required Return - DGR).
- A sudden spike in DGR may indicate a one-time special dividend rather than sustainable growth; use the regular dividend.
- Many dividend growth investors target companies with DGRs above 5% and payout ratios below 60%.
Dividend growth rate: frequently asked questions
What is dividend growth rate?
Dividend growth rate is the annualized percentage rate at which a company's dividend per share has increased over a period of time. A consistent dividend growth rate suggests a company has strong and growing earnings and cash flows.
How is dividend growth rate calculated?
The compound annual growth rate (CAGR) formula is used: CAGR = (Ending Dividend / Beginning Dividend)^(1/n) - 1, where n is the number of years. This gives the smoothed annual growth rate over the entire period.
What is a good dividend growth rate?
Growth rates vary by sector and market environment. A dividend growth rate of 5-10% per year is generally considered healthy for established companies. Growth rates above 10% are impressive but may not be sustainable long-term. Rates below inflation effectively represent a real dividend cut.
Can I use this to project future dividends?
Yes. If you enter a recent dividend and assume the historical growth rate continues, the calculator projects the expected dividend per share in future years. These are estimates only: past growth does not guarantee future growth.
What is the Gordon Growth Model connection?
The Gordon Growth Model (also called the Dividend Discount Model) uses the dividend growth rate to estimate a stock's intrinsic value: P = D1 / (r - g), where D1 is next year's expected dividend, r is the required rate of return, and g is the expected perpetual growth rate.
Official sources
- SEC Investor Publications: Stocks.
- CFA Institute: Discounted Dividend Valuation.
Reviewed by the CalculatorHub team, edited by James Graham, 14 June 2026. See our methodology.