# Calculate Dividend Growth Rate in Excel [2+ Formulas]

Knowing a company’s dividend growth rate in previous years can be very beneficial for an investor. So that, the investor can look into the performance of that company in the past, did they make a profit or loss? This article will help you **with 2+ formulas** to calculate the dividend growth rate in Excel.

## What is Dividend Growth Rate (DGR)?

I am going to explain the terms **Dividend **and** Dividend Growth Rate** separately.

When you want to invest your money in a company, you buy a small share of the company. You become a shareholder of that business company.

After a period of time, the company will make a good amount of profit. And when they make a profit, they will reward all the shareholders with a percentage of the profit for investing in their company.

This percentage of the profit given to the shareholders is called a **Dividend**.

The **Dividend Growth Rate** means the percentage form of the growth rate of a company’s or corporation’s dividend over a span of time.

## Formulas to Calculate Dividend Growth Rate

There are two ways to calculate the Dividend Growth Rate:

- Using the
**Arithmetic Mean**Formula - Using the
**Compound Growth**Formula

- Using the

#### 1. The formula of Dividend Growth Rate Using the Arithmetic Mean

**D = (G1+G2+G3+...+Gn)/n**

In the above formula,

**D**= Dividend Growth Rate.**Gn**= Dividend Growth in the nth year.**n**= Number of total years.

#### 2. The Formula of Dividend Growth Rate Using the Compound Growth

**D = ((Dn/D0)^(1/n))-1**

In the above formula,

**Dn**= Dividend in the last year of the period**D0**= Dividend in the first year of the period**n**= Number of total years

### Method #1: Dividend Growth Rate Using Arithmetic Mean

To show you how use can calculate the **DGR** using the arithmetic mean, I am using a simple dataset of a company with 3 columns **Year**, **Dividend per share** (**DPS**), and the **yearly growth rate**.

I have inserted two spare cells for the **Number of Years** (cell **C12**) and **Dividend Growth Rate** (cell **C13**).

**Usage Guide **

**Step_1: **Write this formula in cell **C13**:

**=SUM(C3:C10)/C12**

**Formula Explanation**

**SUM(C3:C10) **calculates the summation of the values from cell **C3 **to cell **C10**.

**C12 **is the total period of time from the year 2014 to 2022, 8 years.

**Step_2: **Press **ENTER **to apply the formula.

So we can see that the **DGR** is **0.16**. But usually, **DGR** is expressed in percentage.

To convert the result from decimal to a percentage,

**Step_3:** Select cell **C13**.

**Step_4: **Click on the **Home **tab.

**Step_5: **From the **Number **group, select the ‘**%**’ option.

**Final Result >**

Now the result is in percentage form.

### Method #2: Dividend Growth Rate Using Compound Growth

This method is also trouble-free like the previous one.

To show you how to apply it, I am using the previous dataset.

**Usage Guide**

**Step_1: **Type the formula in cell **C13**:

**=(B10/B2)^(1/C12)-1**

**Formula Explanation**

**B10**is the final dividend per share (DPS).**B2**is the starting dividend (DPS).**C12**is the number of total periods, 8 years.

**Step_2: **Press **ENTER**.

**Step_3: **Convert the decimal result into a percentage, and select the** ‘%’** command from the **Number **group.

**Final Result >**

Both methods will give you the same result. You can memorize one of the two methods.

**🔖 ****Reminder: **Notice that both formulas require the difference between the final year of the dividend and the starting year of the dividend. So it’s better if you keep the number of years in a different cell of your dataset before using the formula, just like I did.

## Calculate Sustainable Growth Rate

A **Sustainable Growth Rate (SGR)** refers to the maximum increase in the sales value a company can achieve on its own without taking any external financial support or debt.

The Formula of **Sustainable Growth Rate(SGR)**:

**SGR = ROE x (1 - Dividend Payout Ratio)**

You can calculate the **Return of Equity** **(ROE)** by dividing the net income of a company by the average equity of the shareholders.

Let me give you a simple example of **SGR**. I have a dataset where the **Return of Equity** and **Dividend Payout Ratio** is available.

**Usage Guide**

**Step_1: **Write this formula in cell **C7**:

**=C4*(1-C5)**

**Formula Explanation **

**C4 **is the **ROE **and **C5 **is the **Dividend Payout Ratio **here.

**Step_2: **Press **ENTER**.

**Step_3: **Select the** ‘%’** command from the **Number **group to convert the decimal result into a percentage.

**Final Result >**

Here you have the resulting **SGR**. The formula is really easy to remember.

## Conclusion

I think now you have a clear idea about the **Dividend Growth Rate (DGR)** and how to calculate it in Excel. I hope the formula of **Sustainable Growth Rate (SGR)** also helped you in some way. Feel free to comment below if you have further confusion regarding this topic. Have a good day!

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