How to use this calculator
- Income goal: the dividend income you want, per month or per year.
- Expected portfolio yield: the yield you expect across everything you hold, not just your highest payer.
- Current portfolio: what you already have invested for income. Leave it at 0 to start from scratch.
- Monthly contribution: new money you add each month.
- Dividend growth and price growth: how fast you expect dividends and share prices to rise each year.
- Reinvest dividends: whether dividends buy more shares until you reach the goal, or get taken as cash.
The formula
The first answer, the portfolio you need, is one division:
Yearly goal = Monthly goal × 12
Portfolio needed = Yearly goal ÷ Yield
The yield is written as a decimal here, so 4% is 0.04. This is the portfolio that pays your goal at today’s yield, with no growth assumed.
The second answer, how long it takes, comes from a month-by-month projection. Each month your contribution goes in. Share prices rise a little every month. Dividends are paid four times a year and, if you reinvest, buy more shares. Companies raise their dividends once a year. The calculator stops in the first month when your yearly dividend rate (what your holdings would pay over the next twelve months at the current dividend) reaches the goal.
Worked example
With the starting numbers, you want $2,000 a month from a portfolio yielding 4%. You have $50,000 invested today and add $1,000 a month.
- Yearly goal: $2,000 × 12 = $24,000.
- Portfolio needed: $24,000 ÷ 0.04 = $600,000.
- After the first year, with $12,000 added and dividends reinvested, the portfolio is worth $66,620.11 and pays dividends at a rate of $2,562.31 a year.
- Dividends rise 5% a year and prices 4%. The yearly dividend rate first reaches $24,000 after 15 years and 1 month.
Notice that the portfolio at that point is worth less than $600,000. Dividends grew faster than share prices, so by then the shares yield more than 4% on their current value. That is why the projection and the simple division can give different pictures, and why both are shown.
Yield vs growth: two roads to the same goal
A high-yield portfolio needs less money to reach the goal on day one, but its dividends often grow slowly. A lower-yield portfolio with fast-growing dividends needs more money up front, but its income climbs each year on its own. Run the calculator both ways, for example 6% yield with 2% growth, then 3% yield with 8% growth, and compare how long each takes with your contributions. The Dividend Growth Calculator shows how much a growth rate adds over time.
What reinvesting changes
With reinvesting on, every dividend buys more shares, and those shares pay their own dividends. In the early years it barely shows. Later it does a large share of the work, because the dividends become large compared with your monthly contribution. Turn reinvesting off to see the slower path you get if you spend the dividends along the way.
Tip: once you reach the goal and stop reinvesting, your income still grows with each dividend raise. A goal reached with a portfolio of fast-growing payers tends to keep pace with rising prices better than one reached through yield alone.
What this calculator assumes
Growth is smooth and steady, which real markets never are. Dividends are before tax and are paid quarterly. The goal is in today’s dollars only in the sense that it doesn’t change; it isn’t adjusted for inflation. For a plan built around a retirement date, with inflation included, use the Retire on Dividends Calculator. To turn the goal into a share count for one stock, try How Many Shares for a Dividend Goal.