How to Calculate Return Rate on Dividends
Investors can earn dividends from the ownership of dividend-paying stock shares or mutual fund shares, including exchange traded funds (ETFs). The dividend yield or return rate may be a substantial portion of the total investment return. Although future dividend payments are not guaranteed for these types of investments, the current dividend rate can provide an indication of what an investor will earn going forward.
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Instructions
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1
Locate the investor information page for the specific investment. Public companies have an investor-relations page somewhere on the company's website. The investor relations link can usually be found at the very top or bottom of the website home page. Mutual funds and ETFs also have web pages that provide investor information; typically, find information by clicking on the home page of the fund family or sponsor.
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2
Determine the frequency of dividend payments for the specific investment. Dividend-paying stocks and stock funds often pay quarterly dividends. Bond and income funds may pay monthly distributions.
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Locate the dividend or distribution history page on the company or fund website. There will be a link on the investor information page, usually titled "dividend history" for stocks and "distributions" for funds. Other possible link locations are stock information or performance.
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Add together the last year's worth of dividend payments. If the payout frequency is quarterly, use the last four dividends. If the payout is monthly, the last 12 dividends will be totaled.
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Divide the previous year worth of dividend by the current share price and multiply times 100. The result will be the dividend return rate expressed as a percentage. For example, in November 2010, the Johnson & Johnson Company (JNJ), had paid a total of $2.11 for the last four dividends. The current share price was $63.14. According to the above formula, this results in a dividend rate of 3.34 percent.
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Tips & Warnings
The dividend rate of any investment will change as the share price changes. A rising share price will cause the dividend rate to fall and a falling share price results in a higher current yield.
If the company has a policy of paying a fluctuating dividend, the current dividend rate has little meaning.
The current dividend rate for any stock or fund is not guaranteed. Investors should review the dividend history for several years to get an indication of the company's or fund's dividend payment policy.
