Dividend reinvestment calculator
Project dividend growth with optional reinvestment — see yield on cost rise as dividends compound.
Calculator investmentsLogic updated April 2026
This calculator projects a dividend-paying portfolio with optional dividend reinvestment (a 'DRIP'). When dividends are reinvested, they buy fractional additional shares each year at the end-of-year share price — adding more dividend-paying shares to the position, which produces more dividends to reinvest, and so on. The compounding effect on long-term wealth is significant.
How this is calculated
Formula
Each year: dividend per share = previous dividend × (1 + dividendGrowth/100) ; total dividends = shares × dividend per share ; if reinvest: new shares = shares + (total dividends / end-of-year price) ; end-of-year price = previous price × (1 + priceGrowth/100)Step-by-step
- Calculate initial shares: initial investment ÷ share price
- Calculate initial dividend per share: share price × dividend yield / 100
- For each year: grow the dividend per share by the dividend growth rate
- Compute total dividends: current shares × dividend per share
- Grow the share price by the price growth rate to derive the end-of-year price
- If reinvesting, divide total dividends by the end-of-year price to get additional shares (fractional allowed)
- Track both trajectories — with and without reinvestment — so the user sees the delta
- Rounding mode
- ROUND_HALF_UP
- Precision
- 20-digit internal precision (Decimal.js), rounded to 2 decimal places for display
- Logic last reviewed
Assumptions & limitations
What this calculator assumes
- Dividends are paid and reinvested annually at the end of each year
- Reinvestment purchases fractional shares at the end-of-year share price
- Dividend per share grows at the specified annual growth rate
- Share price grows at the specified annual growth rate, independent of dividend growth
- Taxes, brokerage, and any tax credits attached to dividends are not modelled
What this calculator doesn’t account for
- Real dividend payouts can be quarterly, semi-annual, or irregular — the annual model is a simplification
- Does not model dividend cuts, suspensions, or special dividends
- Does not include taxation that may reduce the dividend amount available to reinvest
- Does not factor in transaction costs that some brokers charge for reinvestment purchases
- Does not model regression in price growth — assumes a constant rate
Worked example
An investor puts $50,000 into a stock at $100/share with a 4% dividend yield, expects 3% annual dividend growth and 5% share price growth, and holds for 25 years.
| Input | Value |
|---|---|
| Initial investment | $50,000 |
| Share price | $100 |
| Dividend yield | 4% |
| Dividend growth | 3%/year |
| Price growth | 5%/year |
| Horizon | 25 years |
End value with reinvestment: ~$402,000 — Without reinvestment: ~$169,000 (plus ~$108,000 of cash dividends taken)
Initial position: 500 shares at $100 each ($50,000) earning $4 per share = $2,000/year. With reinvestment, every year's dividends buy more shares — by year 25, shares have grown from 500 to about 1,150 thanks to ~25 years of compounding reinvestments. The end-of-year share price has grown to ~$340. Total reinvested portfolio = 1,150 × $340 ≈ $390,000 plus a small final-year dividend. Without reinvestment, the investor still has the original 500 shares worth ~$169,000 but has taken out about $108,000 in cash dividends along the way.
Frequently asked questions
What is a DRIP?
A Dividend Reinvestment Plan — an arrangement where dividends paid by a company or fund are automatically used to buy more shares of the same security, often at zero brokerage cost. Most major listed companies and ETFs offer DRIPs. The shares bought through DRIPs are usually fractional (e.g. 12.347 new shares from a $987 dividend), so every cent of dividend is reinvested.
How does dividend reinvestment compound?
Each year's reinvested dividends become additional shares; those shares pay dividends in subsequent years, which get reinvested into still more shares. The growth is double-compounding: share price growth on a steadily expanding share count, and a steadily expanding dividend payout from that share count. Over 20–30 years this can multiply the cash-only outcome 2–3×.
Reinvest vs take cash?
If you don't need the income now, reinvesting is almost always the wealth-maximising choice — you get the full compounding effect and you avoid paying tax on income you'd then have to redeploy. If you need the income (e.g. retirees living off dividends), taking cash is the right call. The decision is about whether the cash is needed for living expenses, not whether reinvestment is mathematically superior.
How does yield affect reinvestment returns?
Higher-yielding stocks reinvest more dollars per year, so the share-count growth is faster — but very high yields (above 8–10%) often signal a stressed company whose dividend may be cut. The sweet spot for reliable DRIPs tends to be 2–5% yield with consistent dividend growth, where the compounding works steadily without underlying business risk overwhelming the strategy.
Are reinvested dividends taxed?
In most jurisdictions, yes — even though you didn't receive the cash, reinvested dividends are typically still taxable as income in the year they're paid. This calculator doesn't model tax, but it's worth knowing that the after-tax compounding rate is lower than the before-tax rate. Tax-sheltered accounts (where they exist in your jurisdiction) avoid this drag and are the natural home for DRIP strategies.
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