To calculate a dividend’s growth rate you need to get the dividend history. You can usually get this information from the investor relations page of the company you are researching. Once you get a list of the previous years dividends you can calculate the growth rate very easily.
As an example, if this was the dividend paid out 2016- 2018:
2016: $1
2017: $1.10
2018: $1.25
You would say that 2017 had a 10% increase (1.10-1.00=.10, 10/100=10%) and 2018 had a 13.6% increase (1.25-1.10=.15 and 15/110=13.6%).
So average those two out and you get a dividend growth rate of 11.8% over the last two years.
This is the formula we use to calculate the 2 and 3-year dividend growth rates on our REIT page and the 5-year dividend growth rate on our top dividend page.
Dividend growth is a key metric among avid dividend investors. While many companies are able to increase their dividend each year to maintain their status on the dividend aristocrat list they do not all increase their dividend by a significant amount.
We prefer stocks that can boost their dividend by 7% or more each year and give consideration to those increasing by 5% as well. Companies need to be increasing their income to be able to boost their dividend without eating into their payout ratio. Stock buybacks that boost EPS will not aid in long-term dividend growth which is why we now focus on income and revenue growth over the EPS growth metric.
Our dividend growth list filters stocks down to those with a dividend growth rate of 7% or more, a 3-year revenue growth rate of 10% or more and a positive 1 year return.