Growth vs Dividend Calculator
Two stocks, two return profiles, three outcomes. Give the growth stock and the dividend stock their own price growth and yield, then see which builds more after-tax wealth over time.
1What you invest
$
$
optional
yr
2Growth stock
% / yr
% / yr
Total return 12.5% a year
3Dividend stock
% / yr
% / yr
Total return 12% a year
4Account & tax
Account type
%
%
After 20 years, after tax
Total contributed130,000
Growth +42,656
Growth stock ends 42,656 ahead of the dividend stock (reinvested) in after-tax wealth, helped by its 12.5% total return and deferring tax to the end.
Growth stockMost after tax
12.5% total return
519,408 after tax
Final value585,375Dividends received19,495Capital-gains tax−65,967
Dividend · reinvested
12% total return
476,752 after tax
Final value517,800Dividends received142,685Dividend tax−28,537Capital-gains tax−41,048
Dividend · as income
12% total return
384,831 after tax
Stock value300,943Cash from dividends83,889Dividend tax−20,972Capital-gains tax−30,166
Growth stockDividend · reinvestedDividend · as income
$609k
$457k
$304k
$152k
$0
now4y8y12y16y20y
The dividend stock paid 28,537 in dividend tax over 20 years when reinvested, money that left the pot and stopped compounding. The growth stock deferred almost all its tax to the end, which is the quiet edge behind the gap.
Income the dividend stock throws off by year 20
10,129 / yr after tax
12,661 gross at a 4% yield. Spendable cash without selling a share.
How to use this calculator
Two stocks, two profiles, one comparison.
1
Set what you invest
In card 1, enter your starting balance, any monthly contribution, and how many years you will hold. We prefill the balance from your linked accounts when you are signed in.
2
Describe the growth stock
In card 2, give the growth stock its own price growth and any small dividend yield. Its total return is the two added together; nothing is forced to match the dividend stock.
3
Describe the dividend stock
In card 3, set the dividend stock’s lower price growth and its higher yield. A real dividend payer usually grows slower in price but hands you more cash along the way.
4
Set account and tax, then compare
In card 4, choose a taxable or sheltered account and the tax rates. The results show the growth stock against the dividend stock both reinvested and taken as income, after tax.
Key concepts
Why dividends and growth are not what they seem.
Total return = growth + yield
A stock’s total return is its price change plus its dividends. Here you set each stock’s growth and yield independently, so you can model a genuine growth stock (high price growth, little yield) against a dividend stock (slower growth, higher yield), with whatever total returns you believe are realistic.
Dividend tax drag
In a taxable account, dividends are taxed in the year they are paid, even if reinvested. That tax leaves the pot and stops compounding. Price growth is taxed only when you sell, so it compounds untouched for years. The higher the yield, the more this drag bites.
Reinvest vs take income
Reinvested dividends buy more shares and keep compounding. Dividends taken as cash give you spendable income now but forgo that growth, so the stock position ends smaller. We show both so you can see the full cost of taking the income.
Qualified dividends
In the US, qualified dividends and long-term capital gains are often taxed at the same rate. When the dividend stock also grows more slowly, the growth stock’s ability to defer all its tax to the end becomes a real, compounding edge in a taxable account.
The shelter changes everything
In a tax-sheltered account (IRA, 401(k), ISA) dividends are not taxed as they arrive, so the drag disappears. The comparison then comes down purely to which stock has the higher total return and whether you reinvest, not to tax at all.
Income you can spend
The dividend stock’s appeal is cash without selling: a paycheck from the portfolio that is useful in retirement and psychologically easier to hold in a downturn. The cost is usually a smaller final pot. The tool shows both sides of that trade.
Yield on cost
Your current annual dividend divided by what you originally paid for the position, not by today's price. Because this calculator applies a constant yield to a growing balance, the cash payout rises with price growth: a stock bought at a 4% yield whose payout grows 8% a year reaches roughly an 18.6% yield on cost after 20 years, doubling about every 9 years. It is a satisfying number to watch, but for deciding what to hold today, only the current yield and the expected total return matter.
The ex-dividend price drop
A dividend is not free money: on the ex-dividend date the share price falls by roughly the amount paid out, because that cash has left the company. A payout converts part of your position into cash rather than creating new value, and in a taxable account it triggers tax at that moment. That is why this tool asks for price growth and yield separately: together they form the total return, and a stock paying 4% while growing 4% delivers the same 8% total as a pure grower, just split differently and taxed earlier.
Tips for choosing a strategy
Make the decision with your eyes open.
Hold dividend payers in a shelter
If you want a dividend strategy, an IRA, 401(k) or ISA removes the annual tax drag entirely. Keep tax-inefficient, high-yield holdings out of taxable accounts where you can.
Do not chase yield
A very high yield is often a warning, not a gift: it can signal a falling price or a payout the company cannot sustain. Judge a holding on total return and durability, not headline yield.
Reinvest until you need the cash
In the accumulation years, reinvesting dividends keeps every dollar compounding. Switch to taking them as income only when you actually need to spend it.
Be honest about growth
The result hinges on the growth rates you assume. A dividend stock that truly matches a growth stock's total return is rare; set the price growth to what you genuinely expect, not to make a point.
Mind the long horizon
The tax-drag gap is small in year one and compounds. Over thirty years it can be large, so the longer you hold, the more deferral favours the lower-yield, higher-growth stock in a taxable account.
Check the payout ratio
Before trusting a yield, check what share of earnings it consumes. Payouts above roughly 70 to 80% of profits leave little room for setbacks, and a dividend cut usually hits the share price as well as your income.
FAQ
Do the two stocks have to earn the same total return?+
No. You set each stock’s price growth and yield independently, so their total returns can differ, which is realistic: a growth stock and a dividend stock rarely deliver the same total. If you do want a like-for-like test, simply set the growth rates so the totals match; the choice is yours, not forced by the tool.
Why show the dividend stock twice?+
Because reinvesting versus spending dividends leads to very different places. Reinvested, the dividends buy more shares and compound. Taken as income, they leave the position as cash, so the stock ends smaller but you have collected spendable money along the way. Seeing both makes the cost of the income obvious.
How are dividends taxed here?+
In a taxable account, every dividend is taxed in the year it is paid at the rate you set, whether or not it is reinvested. Price growth is taxed only at the end, on the gain, at the capital-gains rate. In a sheltered account, neither is taxed along the way.
What is "after-tax value"?+
It is what you would keep if you sold everything at the end. We take the final position, subtract capital-gains tax on the gain, and for the not-reinvested case add the cash dividends you already collected (which were taxed as they arrived). It is the honest, fully-liquidated number to compare.
Why does the growth stock often win in a taxable account?+
Two compounding advantages line up: it usually has the higher price growth, and it pays little or no dividend, so almost none of its return is taxed until you sell. The dividend stock pays tax every year, and that money stops compounding. In a sheltered account the second advantage vanishes.
Does it account for inflation or fees?+
No. All figures are nominal and before fees. For after-inflation, after-fee modelling of a single portfolio, use the Investment Return Calculator. This tool is focused on the growth-versus-dividend trade specifically.
How big a portfolio do I need to live off dividends?+
Divide the income you want by a realistic yield. For 24,000 a year at a 4% yield you need about 600,000; at 3%, about 800,000. Tax raises the bar: with a 20% dividend tax you need 30,000 gross to keep 24,000, about 750,000 at a 4% yield. Set the dividend stock's yield and your tax rate above, then check the income callout to see what your own inputs would pay out in the final year.
What is a DRIP (dividend reinvestment plan)?+
An arrangement where your broker automatically uses each dividend to buy more shares, often including fractions, with no manual step. It is exactly what the reinvested scenario here models: every payout, minus any dividend tax, goes straight back into the position and compounds. Note that automatic reinvestment does not avoid tax in a taxable account: the dividend is taxed in the year it is paid whether you take the cash or not.
What is a good dividend yield?+
Broad stock markets have recently yielded roughly 1 to 2%, and classic dividend stocks or dividend-focused funds usually sit around 2 to 4%. Yields of 6% and above deserve suspicion rather than excitement: they often reflect a fallen share price or a payout the company may not sustain. Rather than hunting a magic number, enter a plausible yield-and-growth pairing above and judge the result on total after-tax wealth, not on the headline yield.
Does the dividend income grow over time?+
Yes. The yield you set stays constant as a percentage, but it applies to a balance that rises with price growth and contributions, so the cash amount climbs every year. On a single purchase, a 4% yield with 8% price growth produces income that doubles roughly every 9 years. The income callout under the results shows the final year's payout for the dividend-as-income scenario, after the dividend tax rate you set.
Each stock has its own price growth and dividend yield, set independently. Dividends in a taxable account are taxed each year at the rate you set; capital gains are taxed once, at the end, on the gain above basis. Monthly steps, end-of-month contributions, constant rates, no inflation or fees. Illustrative, not financial advice.
Independent price growth and yield per stock, annual dividend tax vs deferred capital-gains tax · nominal, illustrative, not advice