How to calculate dividend income
Your yearly dividend income is the number of shares you own multiplied by the company’s annual dividend per share. If you own 100 shares of a company that pays $2.00 per share each year, you receive $200 a year before taxes.
Most U.S. companies pay dividends quarterly, so that $200 would usually arrive as four payments of $50. Some funds and real estate investment trusts (REITs) pay monthly.
What is dividend yield?
Dividend yield is the annual dividend per share divided by the share price, shown as a percentage. A $2.00 dividend on a $50 stock is a 4% yield. Because the yield depends on the price, it rises when the stock falls and falls when the stock rises, even if the dividend itself does not change.
A very high yield is not always good news. It can be a sign that investors expect the dividend to be cut, so check the company’s earnings and payout history too.
Where to find the dividend per share
Companies announce dividends in press releases on their investor relations websites. The announcement lists the amount per share, the ex-dividend date (you must own the stock before this date to receive the payment), the record date and the payment date. Multiply a quarterly amount by four to get the annual figure.
Taxes on dividends
In the U.S., “qualified” dividends are generally taxed at lower long-term capital gains rates, while “ordinary” dividends are taxed as regular income. Dividends held in tax-advantaged accounts such as an IRA may be taxed differently. This calculator shows income before taxes; check the IRS or a tax professional for your situation.
New to dividend investing? Read more in our investing guides.