Stock Investment Calculator

Calculate expected rate of return for a stock investment.

Special Instructions

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Selected Data Record:

A Data Record is a set of calculator entries that are stored in your web browser's Local Storage. If a Data Record is currently selected in the "Data" tab, this line will list the name you gave to that data record. If no data record is selected, or you have no entries stored for this calculator, the line will display "None".

DataData recordData recordSelected data record: None
Div/share:Div per share:Current dividend per share:Current dividend per share:

Current dividend per share:

Enter the current dividend per share. Use numeric characters 0-9 only, and a decimal point if applicable.

$
Price/share:Price per share:Current price per share:Current price per share:

Current price per share:

Enter the current market price per share for the company you are researching. Use numeric characters 0-9 only, and a decimal point if applicable.

$
Growth rate:Growth rate:Stock growth rate:Stock growth rate:

Stock growth rate:

Enter the calculated growth rate. Enter as a percentage without the percent sign (for 10%, enter 10). If you are not sure what the growth rate is, click the link in this row to open the Stock Growth Rate Calculator in a new window.

%
Exp ROR:Expected ROR:Expected rate of return:Expected rate of return:

Expected rate of return:

Based on your entries, this is the expected rate of return for the stock you are considering investing in. Please note that the stock investment calculator assumes that future dividends will be paid and will grow on a constant basis, and that the company will grow on a constant basis.

If you would like to save the current entries to the secure online database, tap or click on the Data tab, select "New Data Record", give the data record a name, then tap or click the Save button. To save changes to previously saved entries, simply tap the Save button. Please select and "Clear" any data records you no longer need.

Help and Tools

Learn

What ERR is, how it's calculated, and what it's useful for.

What is ERR?

In the case of stocks, expected rate of return (ERR) is a formula used to forecast the future return on investment from a stock purchase -- which includes income from both equity and dividend growth.

How to Calculate Expected Return of a Stock

To calculate the ERR, you first add 1 to the decimal equivalent of the expected growth rate (R) and then multiply that result by the current dividend per share (DPS) to arrive at the future dividend per share. You then divide the future dividend by the current price per share (PPS) and then add the decimal equivalent of the expected growth rate to get the ERR.

For example, if a stock had a dividend of $1.50, a price per share of $60.00, and an expected growth rate of 10%, then the expected rate of return would be 12.75%, computed as follows:

ERR = ((DPS(1 + R)) ÷ PPS) + R
ERR = ((1.50(1 + .10)) ÷ 60) + .10
ERR = ((1.50(1.10)) ÷ 60) + .10
ERR = (1.65 ÷ 60) + .10
ERR = .0275 + .10
ERR = .1275
ERR = 12.75%

Please note that the ERR formula is based on the dividend growth model, which assumes that dividends will be paid and that both the dividends and the company will grow at a constant rate. Of course, neither of these assumptions will likely hold true in the real world.

What is Expected Rate of Return Useful For?

Since ERR is based on assumptions that rarely hold true, most investors use ERR to compare the potential returns of one stock investment with another. After all, the growth rate figure used in the ERR formula does account for the actual historical growth of a company's earnings per share. Therefore, using ERR to compare potential returns of investing in one company over another makes more sense (at least to me) than using a high expected rate of return as the sole reason for buying shares in a particular stock.

The bottom line is, all methods of forecasting the potential return on investing in stocks are simply methods of making educated guesses. Sure, the better your educated guesses, the more you increase the odds that you will achieve a fair return for the risks you are taking. But there is no way to guarantee that some unforeseen event won't cause you to lose your principal in a short period of time.

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Adjust Calculator Width:

Move the slider to left and right to adjust the calculator width. Note that the Help and Tools panel will be hidden when the calculator is too wide to fit both on the screen. Moving the slider to the left will bring the instructions and tools panel back into view.

Also note that some calculators will reformat to accommodate the screen size as you make the calculator wider or narrower. If the calculator is narrow, columns of entry rows will be converted to a vertical entry form, whereas a wider calculator will display columns of entry rows, and the entry fields will be smaller in size ... since they will not need to be "thumb friendly".

Show/Hide Popup Keypads:

Select Show or Hide to show or hide the popup keypad icons located next to numeric entry fields. These are generally only needed for mobile devices that don't have decimal points in their numeric keypads. So if you are on a desktop, you may find the calculator to be more user-friendly and less cluttered without them.

Stick/Unstick Tools:

Select Stick or Unstick to stick or unstick the help and tools panel. Selecting "Stick" will keep the panel in view while scrolling the calculator vertically. If you find that annoying, select "Unstick" to keep the panel in a stationary position.

If the tools panel becomes "Unstuck" on its own, try clicking "Unstick" and then "Stick" to re-stick the panel.