To calculate the Compound Annual Growth Rate (CAGR) of dividends, you can use the following formula:

where:

• V_f is the final value (ending dividend after the period of interest).
• V_i is the initial value (starting dividend).
• n is the number of years.

Divide the final value by the initial value. Take the result and raise it to the power of one divided by the number of years. Subtract one from this result to get the CAGR.

Example Calculation

Suppose you want to calculate the Dividend CAGR for a stock whose dividend was $2 per share five years ago and is $3 today.

• Initial dividend (V_i): $2
• Final dividend (V_f): $3
• Number of years (n): 5

Using the formula:

So, the dividend grew at a compound annual growth rate of approximately 8.45% over the five-year period.