Dividend Growth
Learn how to calculate and interpret Dividend Growth with its formula, a worked example, industry context and common mistakes.
Measures how quickly dividend payments per share increase over time.
Formula
Dividend Growth = (New Dividend per Share / Old Dividend per Share - 1) x 100%
Worked exampleA dividend rising from $1.00 to $1.20 grows by 20%.
Calculation steps
- Divide the new $1.20 dividend by the old $1.00 dividend.
- Subtract 1 to get 0.20.
- Multiply by 100 to get 20% growth.
How to interpret it
Steady growth can signal confidence in future cash generation, while an unusually fast increase may not be sustainable.
Industry context
Dividend policies vary by market, industry, currency, and company maturity. Examine several years rather than one increase.
Accounting and market variations
Definitions, reporting choices, periods, capital structures, and market conventions can change how this metric should be compared.
- Adjust for stock splits and payment frequency.
- Separate regular and special dividends.
- Do not ignore dividend cuts within the chosen period.