# How to Calculate Growth Rate in Dividends

by Carter McBride ; Updated July 27, 2017

A corporation may pay dividends out of its earnings to investors during the year, although not at a set rate. Investors will then calculate the dividend growth rate to see how much the dividends are growing or shrinking over a period of time. Usually, if dividends are growing, the company is doing well. To calculate the dividend growth rate, the investor needs dividend information that all corporations must disclose.

Step 1

Determine the dividends per share from the beginning of the period examined and the dividends per share from the end of the period. For example, an investor wants to know a firm's dividend growth rate from Year 1 to Year 3. In Year 1, the firm paid dividends of \$1.25 per share. In Year 3, the firm paid dividends of \$1.68 per share.

Step 2

Subtract the latest dividends per share from the older dividends per share. In our example, \$1.68 minus \$1.25 equals \$0.43. This is the change in dividends.

Step 3

Divide the change in dividends by the older dividends per share to calculate the dividend growth rate. In our example, \$0.43 divided by \$1.25 equals 34.4 percent.