Dividend Reinvestment (DRIP) Calculator

Project the growth of an investment when dividends are automatically reinvested, compared with taking dividends as cash.

Result

Loading calculator…

—

How to use this calculator

Enter the initial investment amount.
Enter the expected annual price growth and the dividend yield.
Enter the holding period in years.
Compare the ending value with DRIP against taking dividends as cash.

About this calculator

A dividend reinvestment plan (DRIP) automatically uses the cash dividends a stock or fund pays to buy more shares, rather than paying them out as cash. Those extra shares then earn their own dividends and price appreciation, so returns compound on a growing base — the same engine that makes long-term equity investing so powerful. This calculator contrasts two paths for the same investment: reinvesting every dividend (DRIP), where the total return compounds at roughly the sum of price growth and dividend yield, versus taking dividends as cash, where only the share price compounds and the dividends pile up un-grown on the side. Over long horizons the DRIP advantage can be substantial. The model assumes constant rates for clarity; remember that in a taxable account, reinvested dividends are still taxed in the year they are paid.

How it works — the formula

With DRIP:    Value = P · (1 + g + y)^t
Without DRIP: Price = P · (1 + g)^t,  Cash dividends = Σ y·P·(1+g)^i
(g = price growth, y = dividend yield)

Reinvesting compounds price growth and yield together; taking cash compounds only price growth and leaves dividends un-grown.

Source: SEC Investor.gov — Dividend Reinvestment Plan (DRIP)

Worked examples

Example 1

$10,000, 6% price, 3% yield, 20 yr

Inputs:: principal=10000, priceGrowth=6, divYield=3, years=20
Output:: with DRIP ≈ $56,044

Example 2

$10,000, 6%, 0% yield, 20 yr

Inputs:: principal=10000, priceGrowth=6, divYield=0, years=20
Output:: DRIP = price-only ≈ $32,071

Example 3

$5,000, 4%, 4%, 30 yr

Inputs:: principal=5000, priceGrowth=4, divYield=4, years=30
Output:: with DRIP ≈ $43,219

Limitations

Constant rates; real prices and dividends vary.
Pre-tax — taxable accounts owe tax on reinvested dividends.
Annual compounding approximation of intra-year reinvestment.

Illustrative projection, not investment advice or a performance guarantee.

Frequently asked

What is a DRIP?+

A dividend reinvestment plan automatically reinvests the dividends a security pays back into more shares of that security, often commission-free and including fractional shares. It harnesses compounding by putting dividends to work immediately rather than holding them as idle cash.

How much does reinvesting dividends actually help?+

A lot over long periods. Historically, reinvested dividends have accounted for a large share of total stock-market returns. The longer the horizon and the higher the yield, the larger the gap between reinvesting and taking cash.

Is the total return just price growth plus yield?+

Approximately, when dividends are reinvested. The value compounds at roughly (1 + price growth + yield) per year. The exact result depends on when dividends are paid and the share price at each reinvestment, which this model simplifies to an annual compounding.

Are reinvested dividends taxed?+

Yes, in a taxable account. Even though you never see the cash, reinvested dividends are taxable income in the year they are paid. In tax-advantaged accounts (IRA, 401(k)), reinvestment is tax-deferred or tax-free.

What is the downside of a DRIP?+

It concentrates your money in one holding (less diversification), reinvests regardless of valuation, and complicates cost-basis tracking for taxes. Some investors prefer to pool dividends and reinvest deliberately across their portfolio.

Does this model assume constant returns?+

Yes — it uses a fixed price-growth rate and a fixed dividend yield each year for clarity. Real returns vary, dividends can be cut or raised, and yields fluctuate with price, so treat the projection as illustrative.