Dividend Income Calculator
Enter a portfolio and dividend yield to see the income it throws off — or flip it and find the portfolio size your target income requires.
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The dividend income math
Annual income = Portfolio × Yield · Portfolio needed = Target income ÷ Yield
$250,000 at a 3% yield pays $7,500/year (~$625/month). Flipping it: living on $40,000/year of dividends at 3% needs about $1.33M. Dividend income scales linearly — there are no shortcuts in the formula, only in the yield chosen.
The yield trap
Why not pick 9% yields and need a third of the money? Because yield = dividend ÷ price, and very high yields usually mean the price collapsed — the market pricing in a dividend cut. Sustainable large-cap dividend portfolios run 2–4%; REITs and covered-call funds reach 5–8% with real trade-offs (taxes, capped growth). Chasing double-digit yield is how income investors lose principal.
Dividends are not free money
A dividend payment reduces the share price by the same amount — total return is what matters. The genuine appeals: psychological spendable cash flow without selling decisions, and qualified-dividend tax rates (0/15/20% in the US, below ordinary rates). Compare the total-return approach with the withdrawal calculator.
Frequently asked questions
How much do I need to live off dividends?
Target income ÷ yield. $40,000/year at a sustainable 3% yield needs about $1.33M; at 4%, $1M. Yields far above 4–5% usually carry principal risk.
How much does $250,000 pay in dividends?
About $3,250/year at the S&P 500’s ~1.3% yield, or $7,500/year at 3% in dividend-focused funds — roughly $625/month.
Is a high dividend yield good?
Above ~5–6%, treat it as a warning: yield spikes when the price falls, often anticipating a cut. Check payout ratio and dividend history before believing an outlier yield.
How are dividends taxed?
In the US, qualified dividends are taxed at 0%, 15%, or 20% depending on income; non-qualified (REITs, most foreign) at ordinary rates. Inside IRAs/401(k)s, dividends compound untaxed.
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Last updated: 2026-07-08