Annualized Return (CAGR) Calculator

The Compound Annual Growth Rate (CAGR) is the smooth, fixed annual rate that would produce the same end value as a real investment with a bumpy, year-to-year return.

The formula is straightforward: CAGR = (final / initial)^(1 / years) - 1. So a portfolio that grew from $10,000 to $25,937 over 10 years had a 10.0% CAGR, because 10000 * 1.10^10 = 25,937.

Why CAGR instead of an arithmetic average? Imagine a stock that goes up 100% in year 1 and down 50% in year 2. The arithmetic average is +25% per year - but you are actually back to where you started ($10k -> $20k -> $10k). The CAGR is 0%. CAGR is always the right number for comparing investments because it accounts for the compounding of losses as well as gains.

CAGR has two important limitations. First, it hides volatility - two investments with the same CAGR can have very different drawdowns along the way. Second, it is sensitive to start and end dates. A bull-market peak start and a bear-market trough end will show a depressed CAGR; the reverse will show an inflated one. Always look at long horizons (10+ years) and consider rolling-period CAGRs rather than a single point-to-point figure.

For dividend stocks specifically, the dividend CAGR is often more telling than the share-price CAGR. A company that has grown its dividend at 8% per year for two decades has demonstrated something fundamental about its earnings power - and that is exactly the input the per-stock pages on this site use to project future yield-on-cost.