How to Calculate Growth Rate in Dividends

by Carter McBride ; Updated July 27, 2017
Calculating the dividend growth rate is a useful tool for investors.

A corporation may pay dividends out of its earnings to investors during the year, although not at a set rate. Investors will then calculate the dividend growth rate to see how much the dividends are growing or shrinking over a period of time. Usually, if dividends are growing, the company is doing well. To calculate the dividend growth rate, the investor needs dividend information that all corporations must disclose.

Step 1

Determine the dividends per share from the beginning of the period examined and the dividends per share from the end of the period. For example, an investor wants to know a firm's dividend growth rate from Year 1 to Year 3. In Year 1, the firm paid dividends of $1.25 per share. In Year 3, the firm paid dividends of $1.68 per share.

Step 2

Subtract the latest dividends per share from the older dividends per share. In our example, $1.68 minus $1.25 equals $0.43. This is the change in dividends.

Step 3

Divide the change in dividends by the older dividends per share to calculate the dividend growth rate. In our example, $0.43 divided by $1.25 equals 34.4 percent.

About the Author

Carter McBride started writing in 2007 with CMBA's IP section. He has written for Bureau of National Affairs, Inc and various websites. He received a CALI Award for The Actual Impact of MasterCard's Initial Public Offering in 2008. McBride is an attorney with a Juris Doctor from Case Western Reserve University and a Master of Science in accounting from the University of Connecticut.

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