Key takeaways
- Income today is value × yield — arithmetic on your entries, before any projection.
- The growth assumption carries the whole forecast; small changes compound into large gaps.
- Dividends are decisions, not laws — testing lower growth exposes how fragile a projection is.
From yield to income
Annual dividend income is simply holding value × dividend yield, summed across holdings. A $50,000 position at a 2% yield contributes $1,000 a year. No projection yet — just arithmetic on today’s entries.
The growth layer
Projections add one assumption: dividends grow at some annual rate. Income in year n becomes today’s income × (1 + g)^n. That little g carries the whole forecast — at 5% growth, income doubles in about 14 years; at 2%, it takes 35.
Reinvestment adds a second compounding loop: dividends buy more shares, which pay more dividends. Capital Allocation models these separately so you can see each engine’s contribution.
Example · one number, two futures
A portfolio paying $4,000/yr today, grown at 5%, projects to about $6,500/yr in 10 years. The same portfolio at 2% growth projects to about $4,900. The gap is not market news — it is your assumption, visible.
What the projection cannot know
Dividends are decisions, not laws — companies cut them in hard years, and yields move as prices move. A projection extends your entries; it does not promise their persistence. Treat the output as a trajectory of assumptions, never a schedule of payments.
Reading a dividend projection well
Watch the split between growth-driven and reinvestment-driven income, test a lower growth rate to see fragility, and keep the projection in today’s dollars when comparing against future expenses. Income that merely keeps pace with inflation is standing still — which may be exactly the job you hired it for.
↑ Back to topOpen the Portfolio tracker. Enter holdings with yields and growth rates — the calendar and projections run on your numbers.
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