# How to compute Pag-ibig MP2 dividends?

If you have previously read my article regarding Pag-IBIG MP2 and how to make the most out of it, you may be curious about how the calculations were performed. To be frank, it took me some time to grasp it, and I will explain why later. However,How to compute Pag-ibig MP2 dividends? after spending several hours, I am now able to confidently explain to you how to compute for Pag-IBIG MP2 dividends.

## What are the things to prepare?

“My suggestion to you is to consider following these steps as it could make the process easier for you. While it’s not mandatory, I highly recommend it as it has the potential to save you a significant amount of time.”

1. Pen and paper
2. Calculator
3. Excel Sheet or Google Sheet
• Simple and compound interest formulaTo use the manual method, ensure that you have a pen and paper ready to record the results. While any calculator can be used, a scientific calculator is recommended as it can be more efficient, particularly if you are familiar with the summation function.Alternatively, you can use an Excel spreadsheet to simplify the process. However, it is important to be familiar with the formulas for simple and compound interest.

## How to compute Pag-ibig MP2 dividends?

I will demonstrate how to compute the examples given by Pag-ibig on their official website, using a dividend rate of 7.5%. However, it is important to note that this is just an illustration and the actual dividend rate may vary based on the performance of the Pag-ibig fund.

You can use the average dividend rate over the last 5 years for your own calculations.

So here’s how to compute for Pag-ibig MP2 dividends.

### 1. Monthly contribution with yearly dividend payout

If you choose to invest Php 500 per month for the next 5 years and select the yearly dividend payout option, you will earn Php 5,718.75. This is equivalent to approximately 19% of your total capital of Php 30,000.

Year Monthly Savings (MS) Accumulated MS per Year Cumulative Savings Annual Dividend Payout Total Accumulated Value TAV)
1 500 6,000 6,000 243.75 6,000
2 500 6,000 12,000 693.75 12,000
3 500 6,000 18,000 1,143.75 18,000
4 500 6,000 24,000 1,593.75 24,000
5 500 6,000 30,000 2,043.75 30,000
TOTAL 30,000.00 5,718.75 30,000

Now, let’s compute for the yearly Pag-ibig MP2 dividends.

I prepared a table below so you can visualize how it is done.

Month 1st Year 2nd Year 3rd Year 4th Year 5th year
January 500 6,500 12,500 18,500 24,500
February 1,000 7,000 13,000 19,000 25,000
March 1,500 7,500 13,500 19,500 25,500
April 2,000 8,000 14,000 20,000 26,000
May 2,500 8,500 14,500 20,500 26,500
June 3,000 9,000 15,000 21,000 27,000
July 3,500 9,500 15,500 21,500 27,500
August 4,000 10,000 16,000 22,000 28,000
September 4,500 10,500 16,500 22,500 28,500
October 5,000 11,000 17,000 23,000 29,000
November 5,500 11,500 17,500 23,500 29,500
December 6,000 12,000 18,000 24,000 30,000
TOTAL 39,000 111,000 183,000 255,000 327,000
AVERAGE 3,250 9,250 15,250 21,250 27,250
DIVIDEND 243.75 693.75 1,143.75 1,593.75 2,043.75

“Firstly, you need to calculate the Average Accumulated Monthly Savings (AAMS) for each year. Then, you can use the simple interest formula to calculate the dividends. This involves multiplying the AAMS with the dividend rate.”

If you forgot, the formula is “I = Prt.”

Where:

I= interest earned
P=Principal
r= rate of interest per year
t= time

In this scenario, the value of “t” is one as we are calculating the yearly dividends. For instance, in the first year, the AAMS is valued at Php 3,250. We need to multiply it by the dividend rate of 7.5%, which results in a dividend of Php 243.75 for the first year. The calculation method for the dividends of the following years is identical. I will leave it to you as an exercise to perform the calculations.

### 2. Monthly contribution with compounded savings

If you choose to make monthly contributions with compounded savings, things can become a bit complex. However, don’t worry, I can provide a clear explanation on how to calculate the numbers.
.

RELATED: The Rule of 72 | Compounding of Interest Made Easy

Year Monthly Savings (MS) Accumulated MS per Year Cumulative Savings Dividend Amount Total Accumulated Value (TAV)
1 500.00 6,000.00 6,000.00 243.75 6,243.75
2 500.00 6,000.00 12,243.75 712.03 12,955.78
3 500.00 6,000.00 18,955.78 1,215.43 20,171.21
4 500.00 6,000.00 26,171.21 1,756.59 27,927.81
5 500.00 6,000.00 33,927.81 2,338.34 36,266.14
TOTAL 30,000.00 6,266.14 36,266.14

Initially, you only calculate the interest earned on the principal amount for the first year. From the second year onwards, you need to calculate the interest earned for that year as well as the interest earned from the previous years’ dividends. This process is known as compounding of interest, where your interest generates further interest. However, before starting the calculation, here’s a quick overview of the dividends in the first example.

• 243.75
• 693.75
• 1,143.75
• 1,593.75
• 2,043.75The dividend amount in the initial year is Php243.75, which is identical to the dividend amount in the first scenario. In the subsequent year, the dividend amount will be the sum of the second year’s dividend amount from the first example and the interest earned from the dividend in the first year. The equation representing this calculation is as follows.2nd-year dividend = Php693.75 + (Php243.75)*0.075 = Php712.03“In the third year, the dividend will consist of the third year’s dividend from the first example, as well as the interest earned from both the first and second year dividends.”3rd-year dividend = Php1,143.75 + (Php712.03 + Php243.75) * 0.075 = Php1,215.43Again, I will just leave the remaining years as an exercise.

### 3. One-time contribution with yearly dividend payout

If you’re considering making a single investment that pays dividends annually, this calculation can assist you in predicting your earnings for the next five years.

Year Monthly Savings (MS) Accumulated MS per Year Cumulative Savings Annual Dividend Payout Total Accumulated Value TAV)
1 1,000,000 1,000,000 1,000,000 75,000 1,000,000
2 0 0 1,000,000 75,000 1,000,000
3 0 0 1,000,000 75,000 1,000,000
4 0 0 1,000,000 75,000 1,000,000
5 0 0 1,000,000 75,000. 1,000,000
TOTAL 1,000,000.00 375,000 1,000,000

Calculating the dividend is a basic and easy calculation. You simply multiply the capital by the dividend rate. For instance, if the dividend rate is 5%, and the capital is Php 1,000, the dividend would be Php 50.

In the given example, the dividend is Php 75,000, and it remains the same for each year because the Total Accumulated Value (TAV) stays constant. However, if you opt to compound your savings, the situation would be different.

### 4. One-time contribution with compounding savings

If you have read my previous article about how to maximize your dividends through Pag-ibig MP2, you would know that this calculation will result in the most significant earnings. The computation is based on two essential factors.

Firstly, the capital amount is already earning the full dividend rate for every year. This is different from monthly savings, where you only earn a fraction of the rate for each monthly contribution.

Secondly, the interest earned on your investment will also earn interest, resulting in compound interest.

Year Monthly Savings (MS) Accumulated MS per year Cumulative Savings Dividend Amount Total Accumulated Value TAV)
1 1,000,000 1,000,000 1,000,000 75,000 1,075,000
2 0 0 1,075,000 80,625 1,155,625
3 0 0 1,155,625 86,672 1,242,297
4 0 0 1,242,297 93,172 1,335,469
5 0 0 1,335,469 100,160 1,435,629
TOTAL 1,000,000 435,629 1,435,629.33

Now, we’ll use the compound interest formula to compute the dividends.

So here’s the formula.

FV = PV (1 + r) ^ t

Where:
FV = Future Value
PV = Present Value
r = rate of interest per year
t = number of periods lapsed (no. of years)

Let’s use it to compute the future value of your one-time investment after 5 years.

FV = 1,000,000 * (1 + 0.075) ^ 5 = Php 1,435,629.33

If you choose to reinvest your dividends instead of receiving them each year, you can grow your capital by 43.6%, compared to only 37.5% if you opt to receive dividends annually. You may consider this difference as insignificant, but it’s still a 6.1% disparity. Over a period of more than 5 years, even a small difference like this can become more apparent.