Yearly income
–
Calculator · Dividends
Dividend income calculator
Enter the shares, the share price, the annual dividend per share and what you paid. The dividend income calculator returns the yearly income, the current yield and the yield on cost, and, if you add a margin loan and a rate, the income left after interest.
Current yield
–
Yield on cost
–
Income after margin interest
–
The working
Income, yield and yield on cost
Yearly income is shares times the annual dividend per share: 500 shares paying $2.40 bring in $1,200. Current yield divides the dividend by today's price, $2.40 over $60, or 4.00%. Yield on cost divides it by what you paid, $50 on the defaults, for 4.80%. The two drift apart as soon as the price moves. Current yield is what a new buyer would get. Yield on cost describes what your own money earns, and it rises with every increase in the dividend, whatever the price does.
When the shares are bought on margin
A margin loan turns the dividend into a spread trade. Income arrives on the whole position while interest is charged on the loan, so on the defaults a $10,000 loan at a hypothetical 9% costs $900 a year and leaves $300 of the $1,200. The working also prints the loan rate at which interest would eat all of the income, here $1,200 / $10,000, or 12%. At a hypothetical 12%, the spread is gone and what remains is a bet on the price. If the price falls 10%, the $30,000 position loses $3,000, ten years of the $300 spread. Buying dividend stocks on margin argues that this spread, and the price risk sitting behind it, decide whether the trade is worth making. Shares bought on margin still pay dividends to you, though shares your broker lends out can pay a substitute payment in lieu, taxed differently; do you get dividends on stock bought on margin covers the detail.
What the income figure leaves out
The calculator assumes the dividend holds for a full year. Companies cut, suspend and raise dividends, and a yield that looks high because the price has fallen can be a warning. Part of a distribution may be return of capital, which lowers your cost basis and is not taxed as dividend income when paid. Taxes are left out as well; situations differ. Margin rates are variable and often tiered by balance, so the $300 moves every time the rate does. Check your broker's current rate table before you rely on the spread. The dividends section has more on income stocks held with and without a loan.
Questions about this calculator
Is yield on cost better than current yield?
They answer different questions. Current yield compares the dividend with what the shares would cost today, the fair basis for deciding whether to keep holding or buy more. Yield on cost measures the income against your original outlay, which is good for tracking growth in the payout and poor for comparing one investment with another.
What if margin interest is larger than the dividend income?
The result goes negative, and the position costs money to hold before any change in the share price. A rise in the price can still make the trade profitable, which turns it into a bet on price as much as on income. The interest keeps accruing every day whether or not a dividend is paid that month.
Does the calculator handle quarterly or monthly dividends?
Enter the annual total per share. For a stock paying $0.60 a quarter, that is $2.40. The timing of payments and the ex-dividend date are not modeled; you have to own the shares before the ex-dividend date to receive the next payment.
Other calculators
- Margin Call Calculator
The share price that triggers a margin call on a long or short position, from your loan and the maintenance requirement.
- Margin Interest Calculator
Interest on a margin loan by the day, the month and the holding period, and the return a trade needs to cover it.
- Leverage Calculator
Your leverage ratio from equity and position value, and what a given market move does to your equity.
- Loss Recovery Calculator
The gain needed to get back to even after a loss, and the balance after a run of losing and winning trades.
- Position Size Calculator
Shares from your account risk and stop, the reward in R, and the loss if the stock opens past the stop.
- Options Break-Even Calculator
Break-even price, maximum loss and profit at a target for a bought or sold call or put.
- Profit Margin Calculator
Gross, operating and net margin from an income statement, and earnings per share from the share count.