Dividend 6% doesn't mean your money grows 6% a year
Many people see a dividend stock with a 6% yield and think, "If I keep investing, my money will compound at 6% per year." In reality, two main deductions make this number untrue.
Deductible 1: 10% Withholding Tax
Dividends in Thailand are subject to an immediate 10% withholding tax. A 6% dividend yield therefore translates to only 5.4% in your hand annually.
Deductible 2: Dividends Don't Auto-Compound
Dividends are paid in cash to your bank account. If you do not manually reinvest them by buying more shares, they sit idle and do not compound. Furthermore, most high-dividend stocks experience very little price growth because companies distribute their profits instead of expanding their business.
Real Numbers for a 10M Goal in 20 Years
| Assumption | Monthly Investment Required |
|---|---|
| Full 6% Compounding (Dream Scenario) | ~22,000 |
| 6% Dividend, After 10% Tax (5.4% Compounding) | ~23,600 |
| 6% Dividend, But No Reinvestment | Cannot reach with principal alone (requires ~41,700) |
The difference of several thousand per month amounts to millions over 20 years. Therefore, when using the DCA Calculator, enter the dividend rate separately from the price growth rate and check "Reinvest dividends." The system will handle the tax automatically.
This article is for general knowledge only and does not constitute investment advice.