Calculate your dividend income, yield, and see how DRIP reinvestment compounds your wealth over time.
Dividend investing generates passive income from stocks, ETFs, or REITs that distribute a portion of their earnings to shareholders. The key metric is dividend yield — the annual dividend per share divided by the current share price. Dividend growth investing focuses on companies that consistently raise dividends each year (the S&P 500 Dividend Aristocrats have raised dividends for 25+ consecutive years).
Yields of 2–4% are generally safe and sustainable for established companies. Yields of 4–6% may be fine for REITs, utilities, or business development companies (BDCs) that are structured to pay high dividends. Yields above 7–8% on regular stocks are a warning sign — they may indicate an upcoming dividend cut or unsustainable payout ratio. Always check the payout ratio (dividends paid / earnings): below 60% is generally sustainable.
Even if dividends are automatically reinvested via DRIP, they are still taxable in the year received (in taxable accounts). Each DRIP purchase creates a new tax lot with a cost basis equal to the reinvestment price, which matters when you eventually sell. In IRA or 401(k) accounts, DRIP is fully tax-advantaged — no current tax on reinvested dividends.
S&P 500 Dividend Aristocrats are companies that have increased their dividend every year for at least 25 consecutive years. Examples include Johnson & Johnson, Coca-Cola, Procter & Gamble, and 3M. These companies demonstrate strong business models, pricing power, and consistent cash generation. The Dividend Aristocrats index has historically matched or beaten the S&P 500 with lower volatility.