About the Dividend Reinvestment Calculator
This dividend reinvestment calculator (DRIP calculator) projects what happens when every dividend buys more shares instead of landing in your cash account. Enter your starting investment, the share price, the current dividend yield, how fast you expect the price and the dividend to grow, and any yearly contribution.
It shows your portfolio value with dividends reinvested, the value if you took dividends as cash instead, the extra wealth reinvestment creates, your share count and the yearly dividend income your position would generate at the end. It is ideal for dividend-growth investors and anyone deciding whether to turn on DRIP at their broker.
The model uses yearly steps: dividends for each year are paid at year-end and reinvested at the new share price, and contributions buy shares at that same price. Taxes on dividends are ignored, which matches holding the position in an IRA, 401(k) or ISA.
With the default inputs, the value with dividends reinvested is $102,240.92. Change any value above to recalculate instantly.
How to use the dividend reinvestment calculator
- 1Enter your starting investment and today’s share price.
- 2Enter the current dividend yield of the stock or fund.
- 3Set realistic price and dividend growth rates — long-run dividend growers often sit around 4–7%.
- 4Add a yearly contribution if you will keep buying.
- 5Choose the number of years and compare the DRIP and cash lines on the chart.
Formula and method
The calculator steps forward one year at a time. Each year’s dividend is the current share count times the dividend per share. At year-end the share price grows by the price growth rate, the dividend (and any contribution) buys new shares at that price, and the dividend per share then grows by the dividend growth rate.
The starting dividend per share is the share price × current yield. The no-DRIP comparison holds the same shares plus contributions and collects dividends as cash without interest, so the “extra wealth” figure isolates the compounding effect of reinvestment. Yield on cost is final yearly income divided by the total amount you invested.
- Sₜ
- Shares owned in year t
- DPSₜ
- Dividend per share in year t
- Pₜ
- Share price in year t
- C
- Yearly contribution
- g_p, g_d
- Annual price growth and dividend growth rates
Worked examples
$20,000 at a 3.5% yield for 20 years
Starting with 400 shares at $50, reinvested dividends build the position to about 771 shares worth $102,241. Taking dividends as cash leaves $53,066 of stock plus $23,146 of cash — so reinvesting adds about $26,029 of extra wealth, and the final yearly income is about $3,578.
$10,000 plus $1,200 a year into a 3% dividend grower for 25 years
Investing $40,000 in total with 6% price growth and 7% dividend growth, the reinvested position reaches about $202,628 and pays roughly $7,687 a year in dividends — a yield on cost above 19%.
High-yield, slow-growth stock: 5% yield, 2% growth, 10 years
With most of the return coming from dividends, reinvesting nearly doubles the $50,000 to about $98,358 in ten years, around $10,034 more than holding the shares and pocketing $27,374 of cash dividends.
Frequently asked questions
What is a DRIP?+
A dividend reinvestment plan automatically uses each dividend to buy more shares of the same stock or fund, often in fractional shares and without commission. Most US brokers offer DRIP as a simple account setting.
Are reinvested dividends still taxed?+
Yes. In a taxable account reinvested dividends are taxed in the year they are paid, exactly as if you had received cash. Each reinvestment also creates a new cost-basis lot. Inside an IRA, 401(k) or ISA there is no tax when they are paid.
How much difference does reinvesting dividends make?+
It grows with time and yield. Over 20–30 years, reinvested dividends typically account for a large share of a stock’s total return, because every dividend buys shares that pay dividends of their own.
Should I reinvest dividends or take cash?+
Reinvesting suits investors still building wealth who do not need the income. Retirees living on dividends, or investors who prefer to direct cash to underweight holdings when rebalancing, often take the cash instead.
What is yield on cost?+
Yield on cost is your current yearly dividend income divided by the total amount you invested. With dividend growth and reinvestment it can rise far above the stock’s current market yield.
Results are estimates for educational purposes and are not financial advice. Rates, fees and terms vary — confirm with your lender or a licensed advisor before making decisions.