Here’s how the dividend income on a capital investment of 10k grows when compounded annually at 7%, using the formula:
A = P \cdot (1 + r)^t
Where:
- P = 700
- r = 0.07 (7% annual interest)
- t is the number of years
If you have longer to compound
Reaching 53%, you have to allow for inflation and any for any years when the dividend yield is under 7% but you will have years like now when the dividend yield is above 7%. On the capital invested, the dividends should gently increase and you will get the yield on your buying price not the current headline price.
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