Dividend Calculator
Dividends are the share of profit a company pays out to shareholders. This calculator works out yield and the income a holding generates.
Formula
Dividend yield = annual dividend per share ÷ share price × 100
- Annual income = shares held × dividend per share
- Yield rises when the price falls, which is not always good news
£1.50 a share on a £30 price: 1.50 ÷ 30 × 100 = 5%
Yield and Income
Dividend yield = Annual dividend per share ÷ Share price × 100
A share paying £2.50 a year at a price of £50 yields 5%.
Annual income is simply the dividend per share multiplied by the number of shares held. Yield moves inversely with price: if the share price halves and the dividend holds, the yield doubles.
A High Yield Can Be a Warning
Because yield rises as price falls, an unusually high figure often reflects a falling share price rather than generosity. This is the yield trap: the market may be pricing in a dividend cut that has not been announced yet.
Check the payout ratio — the share of earnings paid out as dividends. Above 80% leaves little room for a bad year, and above 100% means the company is paying out more than it earns, which cannot continue indefinitely.
Dates and UK Tax
To receive a dividend you must own the shares before the ex-dividend date. Buy on or after it and the payment goes to the seller.
In the UK, dividends above the annual dividend allowance are taxed at rates depending on your income tax band, and the allowance has been reduced substantially in recent years. Dividends inside an ISA or pension are sheltered entirely. Check current allowances and rates on GOV.UK, as they change frequently.
Quick Reference
| Dividend | Share price | Yield | Income on £10,000 |
|---|---|---|---|
| £0.05 | £1.00 | 5.00% | £500 |
| £0.20 | £5.00 | 4.00% | £400 |
| £1.50 | £30.00 | 5.00% | £500 |
| £2.00 | £25.00 | 8.00% | £800 |
Frequently Asked Questions
- How do I calculate dividend yield?
- Divide the annual dividend per share by the current share price and multiply by 100. £2.50 on a £50 share is a 5 per cent yield.
- Is a high dividend yield good?
- Not necessarily. Yield rises when the price falls, so an unusually high figure often signals a struggling company and a dividend at risk.
- What is the payout ratio?
- The proportion of earnings paid out as dividends. Above 80 per cent leaves little margin for error; above 100 per cent is unsustainable.
- When do I need to own the shares?
- Before the ex-dividend date. Buying on or after that date means the current payment goes to the seller instead.