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DIVIDEND YIELD / STABLE GROWTH

Dividend Growth Implied Return Calculator

Estimate the return implied by next dividend yield plus stable growth. Review the entered period, benchmark, and risk assumptions alongside the result.

  • 01 Calculated in this tab
  • 02 Values stay in this browser tab
  • 03 Use boundary

Conversion input

Known value

Filter by unit name, symbol, or code. Your current selections remain available.

Scenario inputs

Preparing the calculator...

METHOD / WORKED EXAMPLE

Decompose the return embedded in a stable-growth price

Rearranging the Gordon model shows an implied return as forward dividend yield plus stable growth, while preserving the same demanding assumptions about payout and perpetuity.

WORKED DEFAULT

Check the calculation with the default inputs

At a $50 price, $3 expected next-year dividend, and 4% stable growth, forward dividend yield is 6% and the implied annual return is 10%.

  1. Find forward yield$3 / $50 = 6%
  2. Use stable growthGrowth = 4%
  3. Add components6% + 4% = 10%

READ THE RESULT

Interpret the output in context

The result is an implication of the entered price and growth assumptions, not an independently observed expected return. Test alternative dividends and growth rates before interpreting it.

ASSUMPTIONS AND LIMITS

Know where the model stops

  • Price and expected dividend refer to the same share and valuation date.
  • The dividend is expected one year ahead and growth is annual.
  • The firm can sustain stable dividend growth and payout indefinitely.

This stable-growth implication is not a forecast and should not be used circularly to prove that the entered market price is fair.

Aswath Damodaran: dividend growth model

COMMON QUESTIONS

Dividend Growth Implied Return Calculator FAQs

Is implied return the return I will earn?

No. It is the return mathematically consistent with the entered price, next dividend, and perpetual growth under a stable dividend model. Actual returns depend on realized dividends, changing market prices, taxes, costs, and the holding period. The company may also change payout policy or fail to achieve the supplied growth assumption.

Why use next year's dividend instead of trailing yield?

The rearranged Gordon model uses the expected next-period cash flow, D1, because valuation looks forward from today's price. A trailing dividend may differ due to growth, cuts, special payments, or timing. Build a documented next-year estimate and keep annual dividend amount, growth, and return frequency aligned rather than silently combining historical and forward measures.

Can I use this implied return as the discount rate?

You can report it as the rate implied by the supplied market price under this model, but using that same rate to declare the price fair is circular. Compare it with independently estimated required returns, scenario ranges, and alternative valuation methods. Document the growth and dividend assumptions because small changes can materially alter the implied rate.

Use boundary

Calculation path

Divide expected next-year dividend by current price to find forward yield, then add stable dividend growth.

Calculation path

Implied return = expected next dividend / current price + stable dividend growth.