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Dividend stocks or growth stocks: Compare the return

An investment can give a return through rising share prices, dividends or a combination. Here you can set up two scenarios with the same starting amount and period and look at the difference in money.

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Applies to the amounts in this calculator.

The same starting amount is used in both scenarios.

GBP

How many whole years the investment runs.

years

The price increase per year in scenario A, excluding dividends.

%

The dividend for the year in scenario A, as a percentage of the value at the start of the year.

%

The price increase per year in scenario B, excluding dividends.

%

The dividend for the year in scenario B, as a percentage of the value at the start of the year.

%

Before tax and costs. Fixed annual price growth and dividend yield are assumptions. Cash dividends earn no interest.

…

Worked example
  • Reinvestment: Both reinvest
  • Starting amount: 100,000.00 GBP
  • Number of years: 20 years
  • Price growth, scenario A: 4 %
  • Dividend yield, scenario A: 3 %
  • Price growth, scenario B: 7 %
  • Dividend yield, scenario B: 0 %

Result

Shares, scenario A

386,968 GBP

Cash dividends, scenario A

0 GBP

Total value, scenario A

386,968 GBP

Shares, scenario B

386,968 GBP

Cash dividends, scenario B

0 GBP

Total value, scenario B

386,968 GBP

Difference (A − B)

0 GBP

Working

  1. A, shares = K × (1 + (g + d)/100)ⁿ
    100,000.00 GBP × (1 + (4 + 3)/100)^20 = 386,968.45 GBP
  2. A total = shares + cash dividends
    386,968.45 GBP + 0.00 GBP = 386,968.45 GBP
  3. B, shares = K × (1 + (g + d)/100)ⁿ
    100,000.00 GBP × (1 + (7 + 0)/100)^20 = 386,968.45 GBP
  4. B total = shares + cash dividends
    386,968.45 GBP + 0.00 GBP = 386,968.45 GBP
  5. difference = A total − B total
    386,968.45 GBP − 386,968.45 GBP = 0.00 GBP

Choose the price growth and dividend yield for each scenario. You also decide whether the dividends are reinvested or kept as cash.

Compare the total result

It is not enough to compare the final value of the shares if one investment has paid out cash along the way. That is why the calculator shows the shareholding, cash dividends and total value separately.

In the model, the dividend is calculated from the value at the start of the year and reinvested, if chosen, at the end of the year. The cash payouts earn no interest.

The same return from different sources

Scenario A has 7% price growth and a 3% dividend. Scenario B has 10% price growth and no dividend.

With full reinvestment, the two scenarios give the same result in this annual model: 100,000 becomes about 672,750 over 20 years, before tax and costs. A 3% dividend is therefore not automatically an extra advantage if the other investment has correspondingly higher price growth.

Ongoing income or a larger holding?

If the investment is meant to contribute to your ongoing budget, the payouts matter in themselves. If you are saving for a later date, the final value may be more interesting.

The calculator helps describe the difference without choosing a particular stock for you. Future price growth and dividends are unknown, and tax can affect the two paths differently. If you want to look at the effect of costs separately, you can use the investment costs calculator.