Dividend Income Calculator

Dividend income and growth

Year-0 income is portfolio value × yield. Each year, the dividend per dollar invested grows relative to the share price: it scales by (1 + dividend growth) ÷ (1 + price growth). If dividends grow faster than the price, the yield on your holdings drifts up over time. Income each year is value × current yield. The yield on the current price is held at 30% at most, the highest starting yield the calculator takes: decades of dividends far outgrowing the price would otherwise push it into the thousands of percent, which no real portfolio sustains, so past that point dividends grow with the price. The income chart says when that happens.

DRIP (dividend reinvestment)

With reinvestment on, the portfolio grows by both price appreciation and the dividends bought back as shares: value → value × (1 + price growth) + dividends. Those new shares pay their own dividends, so income compounds. With DRIP off, only price growth applies and the cash is paid out to you.

The portfolio-value chart compares the two fairly: beside the DRIP portfolio it shows the shares you keep when you take the cash plus every dividend paid out to you so far, counted at face value (not reinvested, not spent). What DRIP gains over that total is what the reinvested dividends earned on their own. Both are before tax: in a non-registered account a DRIP is still taxed on every dividend it reinvests, and that tax is paid from other money.

Yield on cost

Yield on cost = this year's dividend income ÷ original investment. Unlike the stated yield (based on today's price), yield on cost climbs as a company raises its dividend.

Eligible-dividend gross-up and tax credit (2026)

Canadian eligible dividends are grossed up by 38% to a taxable amount, then reduced by a dividend tax credit: a federal credit of 15.0198% of the grossed-up amount plus a provincial credit (10% in Ontario, 12% in BC, and so on). The tax on your dividends is the difference they make to your whole return: tax(other income + grossed-up dividends, less the credits) − tax(other income alone), on your combined federal + provincial brackets after the basic personal amount, the Ontario surtax and Health Premium, and the Quebec abatement where they apply. As on form ON428, the Ontario surtax is worked out before the Ontario dividend credit comes off, which is why Ontario's top rate on eligible dividends is 39.34%. The rate beside "Other taxable income" is the same difference for the next $1,000 of dividends: (tax(other income + $1,000 of dividends) − tax(other income)) ÷ $1,000. It's an estimate: it ignores CPP/EI, the OAS clawback, the alternative minimum tax, the Ontario tax reduction and other credits.

After-tax income in future years

Tax brackets and credits are indexed to inflation every year, so a future dividend is not taxed on today's brackets. The calculator turns year t's dividend into today's dollars at the FP Canada inflation assumption (2.1% a year), taxes it on the 2026 rules on top of your other income (assumed to rise with inflation, keeping its buying power), and turns the tax back into that year's dollars: tax = (tax(other, D ÷ d) − tax(other, 0)) × d, with d = (1 + inflation)^t. The Ontario Health Premium (at most $900 a year) is the exception: its thresholds are not indexed, and the calculator indexes them with everything else, a small difference. The tax is not floored at zero: when the credits exceed the tax on the dividends, the rest really does come off the tax on your other income, so after-tax income can be higher than the dividend. Income and portfolio figures are in future dollars; divide by d for today's dollars. All of it applies to a non-registered account; in a TFSA there is no tax at all.

Where this year's dividend goes

The bridge chart splits this year's tax into the steps of the return, on the 2026 rules: the tax on the grossed-up dividend at your rates with no dividend credit, then the federal credit, then the provincial credit. Each step is the change in your total tax when that piece is added, so the steps add up exactly to what you keep, and each one already reflects the non-refundable floor (a credit can cut tax to zero, never pay out), the Quebec abatement and the Ontario surtax.

Tax on your next $1,000

The comparison chart repeats that difference for $1,000 more of each kind of income at other incomes from $0 up, under your province's 2026 rules: eligible dividends (grossed up, less the credits), interest or any other fully taxed income, and capital gains (half taxable). It is drawn point to point so the Ontario Health Premium's phase-ins show as the spikes they are. It leaves out CPP/EI on salary and the OAS clawback: if you collect OAS, net income above $93,454 loses another 15%, and dividends count at their grossed-up 138%, so each $1,000 of dividends there costs about $207 more against $150 for interest.

Why low-income retirees can pay ~0% (or negative)

Because the 38% gross-up is offset by the combined dividend tax credit and your basic personal amount, a retiree with little other income can receive substantial eligible dividends and pay close to nothing. At very low incomes the effective rate can even go negative, the dividend tax credit spills over and shelters a bit of other income too. The effective rate shown here is not floored at zero.

What this doesn't model

Dividend cuts, non-eligible (small-business) dividends, foreign-dividend withholding tax, currency effects, fund fees, sequence-of-returns risk, and reinvestment inside registered accounts (TFSA/RRSP dividends are tax-free or tax-deferred, so the tax panel applies to non-registered holdings). A dividend is not free money, the price drops by roughly the payout on the ex-dividend date, so judge holdings by total return, not yield alone. For the full income-tax picture see the income tax calculator, and for realized gains the capital gains calculator.