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Dividend Growth Rate Formula:
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The Dividend Growth Rate measures the percentage increase in dividend payments from one period to the next. It's a key metric for investors evaluating the sustainability and growth potential of dividend-paying stocks.
The calculator uses the dividend growth rate formula:
Where:
Explanation: The formula calculates the percentage change between two consecutive dividend payments, showing how much the dividend has grown over one period.
Details: A consistent and growing dividend payout is often seen as a sign of a company's financial health and management's confidence in future earnings. Dividend growth rate helps investors assess the sustainability of dividend payments and make informed investment decisions.
Tips: Enter both current and next dividend amounts in the same currency. Values must be positive numbers greater than zero for accurate calculation.
Q1: What is considered a good dividend growth rate?
A: A good dividend growth rate varies by industry and company, but generally, consistent growth above inflation rate (2-3%) is considered positive.
Q2: How often should dividend growth rate be calculated?
A: Typically calculated annually, but can be calculated quarterly to track more frequent dividend changes.
Q3: Can dividend growth rate be negative?
A: Yes, if a company reduces its dividend payment, the growth rate will be negative, which may indicate financial difficulties.
Q4: How does dividend growth rate affect stock valuation?
A: Higher dividend growth rates generally lead to higher stock valuations in dividend discount models, as future dividend payments are expected to increase.
Q5: Should I only consider the most recent growth rate?
A: It's better to look at the average growth rate over multiple periods (3-5 years) to get a more comprehensive view of a company's dividend growth pattern.