How Dividend Income Works
Dividend yield = annual dividend per share divided by share price. Yield on cost = annual dividend divided by your original purchase price. As dividends grow over time, your yield on cost increases even if the share price stays the same.
Annual Income = Shares x Annual Dividend Per Share
Dividend Yield = (Annual DPS / Share Price) x 100
Frequently Asked Questions
Yields of 2-4% are typical for stable blue-chip stocks. Yields above 6-7% may signal higher risk or a falling share price. Focus on dividend growth rate as much as current yield — a 2% yield growing 10%/year beats a static 5% yield over time.
Dividend Reinvestment Plans (DRIP) automatically reinvest dividends to buy more shares, accelerating compounding. Over 20-30 years, reinvested dividends can account for 50-70% of total returns in a dividend portfolio.