Comprehensive Guide
Learn more in our Investing Guide.
How it works
A dividend growth projection answers a deceptively simple retirement-planning question: what does an existing dividend stream become if its payers keep raising distributions at a steady clip? Unlike DRIP calculators, nothing here is reinvested — every dollar of income is collected and spent, and growth comes solely from the companies' raises. An $8,000 stream compounding at 7% reaches roughly $15,700 in ten years, but the inflation column is where honesty lives: at 2.5% inflation those future dollars buy only about $12,300 of today's goods, so realized real growth runs closer to 4.4% annually. The schedule lays out each year's nominal income, purchasing-power-adjusted income and running cumulative total — for the defaults, over $115,000 collected across the decade without selling a single share. The growth-rate input deserves respect: it is an assumption, not a law. Portfolio-level growth is the weighted average of every payer's raise, and a single freeze among heavyweights drags the blend immediately, which is why prudent planners model at least a bear-case rate alongside the hopeful one.Formula
Income(year t) = current income × (1 + g)^t | Real income = nominal ÷ (1 + inflation)^t
Tips
- Use your portfolio's trailing 5-year raise average, not last year's best payer.
- Always read the real-dollar column — 7% nominal is ~4.4% real at 2.5% inflation.
- Model a frozen-dividend case (0%) to size your floor if raises stop entirely.
- Spending the dividends is fine; just verify the real column still outruns your costs.
- Raises cluster with earnings — screen payout ratios to keep the growth assumption honest.
Frequently asked questions
How fast do dividends typically grow?
Broad dividend-growth indexes have historically compounded payouts around 5–7% annually over long stretches, though individual years swing widely with earnings cycles. Companies labeled dividend aristocrats — 25+ consecutive years of increases — have tended toward the upper half of that range across full economic cycles.
Will $8,000 of dividends keep up with inflation?
At 7% growth versus 2.5% inflation, yes comfortably: purchasing power grows roughly 4.4% per year, turning today's $8,000 into about $12,300 of real income in a decade. At 3% growth the same stream barely treads water, and at 2% it quietly loses ground every year — the growth rate is everything.
Is dividend growth better than a high starting yield?
They serve different timelines. A 6% yielder produces $480 per $10,000 invested immediately; a 2.5% yielder growing at 8% overtakes it around year nine and pulls further ahead every year after. Retirees needing income today favor yield; accumulators with decade-plus horizons have historically done better prioritizing growth rates.
What growth rate should I assume in projections?
Start with your actual portfolio's weighted-average raise history over the last five years, haircut it a point for conservatism, and run optimistic, base and frozen scenarios side by side. Single-company projections deserve harsher haircuts than diversified funds, because one board's decision can reset a single-stock trajectory overnight.
Do I pay taxes on projected dividend income?
Yes — qualified dividends in taxable accounts face 0%, 15% or 20% federal rates plus state tax, while ordinary-rate dividends from REITs can approach your marginal bracket. The projection here is pre-tax; a $15,700 future stream might net around $13,350 after a 15% federal rate, so build the drag into your spending plan.