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Dividends are the portion of profits that companies distribute to shareholders. For long-term investors, they are one of the most powerful sources of return — especially when reinvested. Calculate how dividends build your wealth and passive income over time.

⚠ Illustration. Not investment or tax advice. Historical returns are no guarantee of future results. arvy is a FINMA-regulated asset manager. Imprint

How the calculator works

The calculator uses total return as its basis — price gains + dividends combined. With 7% total return and 2.5% dividend yield, your wealth grows by 7% per year, of which 2.5% is paid out as a cash dividend. The dividend yield on the current market value stays roughly constant long-term — because as per-share dividends grow, share prices typically grow alongside them.

Dividend growth shows up in a separate metric: Yield on Cost. If per-share dividends grow at 5% per year, they double every 14 years — measured against your original cost basis, you climb from 2.5% YoC in year 1 to 6.6% YoC in year 20. That's the real "compounding effect" of a dividend growth strategy: not the nominal dividend on your current wealth, but what a share you bought 20 years ago is paying out today.

Why dividend growth matters more than dividend yield

Many investors chase high dividend yields — high-dividend ETFs, telecoms, utilities yielding 5-6%. But a stock with 2% yield and 8% dividend growth beats a stock with 5% yield and 0% growth long-term. After 15 years, the growing stock pays more dividends — and likely has a higher share price too.

Two real-world examples:

Yield on Cost calculated on original purchase price. Quality growth overtakes high-dividend by year 13 — and the gap widens exponentially. Source: arvy calculation based on historical dividend growth rates.

Quality companies in the arvy portfolio offer the opposite combination: moderate starting yield with strong, sustainable growth. Details: Dividends in Switzerland — The Complete Guide and the aristocrat showcase RELX: Low-Uncertainty Dividend Aristocrat.

What is "Yield on Cost"?

Yield on Cost measures the current dividend relative to your original purchase price — not the current market price. If you bought a stock for CHF 100 and it now pays CHF 4 in dividends, your YoC is 4%. If the dividend grows to CHF 8 over the years, your YoC is 8% — even though the current dividend yield based on market value may only be 2% (because the price has risen to CHF 400).

That's the magic of holding quality companies long-term. A classic example: Nestlé shares bought 25 years ago at CHF 30 now pay CHF 3.10 dividend per share. Yield on Cost: 10.3%. Yield on current market value (~CHF 80): only 3.9%. An investor who bought in 1999 and held collects over 10% per year today — risk-free, no further capital required.

The 2.4% reinvestment lever

The DRIP toggle in the calculator looks small — but it represents arguably the single biggest return factor in all of wealth-building math. The J.P. Morgan/FactSet study on the MSCI World from 1970 to 2025 shows four scenarios for the same index, same companies, same timeframe:

Source: FactSet, J.P. Morgan Asset Management. MSCI World Index, 1970–2025, in USD.

2.4 percentage points per year. A factor of 3.4× over 55 years. The difference between reinvested and spent is 16 times larger than any typical TER difference in ETFs. Yet everyone discusses 0.05% TER differences — nobody discusses the 2.4% reinvestment gap. Full math here: The True Cost of Investing.

That's why arvy uses accumulating share classes — automatic reinvestment of all dividends, no behaviour required. The 2.4% works structurally, not dependent on your discipline.

Swiss dividend taxation

Swiss tax logic has an unusual asymmetry that affects every dividend strategy:

• Capital gains: tax-free. For private investors, you pay zero tax on capital gains in Switzerland. Buy at CHF 100, sell at CHF 200 → CHF 100 profit → CHF 0 tax.
• Dividends: fully taxed as income. Every dividend you receive is added to your taxable income and taxed at your marginal rate. At a 30% marginal rate and CHF 5,000 in annual dividends: CHF 1,500 in tax.
• 35% withholding tax: On every Swiss dividend, the federal government automatically withholds 35%. Of CHF 100 gross dividend, only CHF 65 lands in your account. But: fully reclaimable via correct declaration in your securities schedule. Anyone who forgets is giving money away.
• Accumulating funds are also taxed: For accumulating funds, the internally reinvested dividends are still taxed as if received. The Federal Tax Administration (ESTV) lists the taxable income via the ICTax service.

Consequence: CHF 100 capital gain = CHF 100 in your pocket. CHF 100 dividend = only CHF 65-75 after income tax. In Switzerland, capital gains are more tax-efficient than dividends — a strong argument for reinvestment (instead of distribution) and for quality compounders with lower yield ratios.

For the full tax context: Swiss Tax Progression Calculator — see how your marginal rate changes when dividend income is added.

Dividend Aristocrats vs. the high-yield trap

A "Dividend Aristocrat" is a company that has raised its dividend for at least 25 consecutive years. Swiss examples: Nestlé (25+ years), Roche (35+ years). European examples: RELX (25 years), Wolters Kluwer. US Aristocrats: over 70 companies, many with 50+ year track records (Procter & Gamble, Coca-Cola, Johnson & Johnson).

Rule of thumb: the payout ratio (dividend ÷ profit) is the most important early indicator. Below 60% is healthy, 60-80% acceptable, above 80% risky. Nestlé was at ~88% in 2025 — a warning signal that explains the recent thin increases (+1.64% in 2025). Anyone running a dividend strategy should watch payout ratios as carefully as yields themselves.

Three realistic scenarios

DRIP enabled. Illustration. Quality portfolio has lower absolute dividend but higher end wealth — and Yield on Cost grows to 6.4% in year 20 (vs. 5.4% for SMI and 5.0% for high-dividend strategy). Source: arvy calculation.

The quality strategy produces a slightly lower absolute dividend after year 20, but end wealth is 55% higher than the high-dividend strategy and 34% higher than the classic SMI investor. Over 30 years, the gap grows exponentially — because the higher total-return wealth keeps compounding, while the high-dividend strategy structurally fights against mathematical drift.

Frequently Asked Questions