How it is calculated
Each month your contribution buys shares at the current price, and the price rises gradually at your growth rate. Dividends are paid quarterly — shares × dividend per share ÷ 4 — and the tax rate you choose is withheld. With DRIP the net dividend buys more shares at that day's price; without it, the cash accumulates. The dividend per share grows each year at the dividend growth rate, which is what turns a modest yield into a large income stream over decades.
Getting the most from it
Dividend growth matters more than starting yield over long periods. A 3% yield growing 7% a year overtakes a 5% yield that never grows. Try the tax presets: a qualified dividend rate of 15%, 30% for non-treaty foreign holders, or 0% for tax-advantaged accounts such as an IRA where dividends compound untaxed. Yield on cost — this year's dividends divided by everything you put in — shows how your income grows relative to your own money.
Keep in mind
Real prices and dividends do not rise smoothly, and companies can cut dividends. In a taxable account, reinvested dividends are still taxed in the year they are paid. Commissions and currency effects are not included. Use the result to understand long-term direction rather than as a forecast.
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