Dividend Reinvestment Calculator
Project how reinvesting dividends (a DRIP) compounds an investment over time versus taking the dividends as cash.
How it works
Each year: price grows by the growth rate, dividends = shares × price × yield. Reinvested dividends buy more shares; otherwise they pile up as cash.
A dividend reinvestment plan, or DRIP, uses each dividend payment to buy more shares instead of paying you cash. Those extra shares then earn their own dividends, so the share count and the income both compound year after year. This projection grows the share price at the rate you choose and pays a dividend equal to the yield times the current price; the reinvested path buys shares with every payment, while the cash path leaves the share count fixed and lets the dividends accumulate separately.
Worked example
A $10,000 investment at a $50 share price, a 3% yield and 6% annual price growth over 20 years grows to about $57,900 with dividends reinvested, versus about $43,800 if you take the dividends as cash — a gap of roughly $14,100 created purely by compounding the payouts.
Frequently asked questions
Are reinvested dividends still taxed?
In a taxable account, yes — reinvested dividends are generally taxable in the year they are paid, even though you never see the cash. Inside a tax-advantaged retirement account, they compound untaxed until withdrawal.
Is the growth rate guaranteed?
Not at all. Share prices and dividends both rise and fall, and companies can cut payouts. The projection assumes steady, smooth growth, which real markets never deliver — treat it as a rough illustration.
What is the main benefit of a DRIP?
It automates compounding: dividends go straight back to work buying more shares, often commission-free, without you timing purchases. The longer the horizon, the larger the reinvestment advantage tends to be.
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Educational estimate, not investment or tax advice. Returns are never guaranteed and past performance does not predict the future. Confirm with a licensed advisor.