DRIP Calculator

Year-by-year breakdown

The same projection as the chart, in numbers. “Cash” is the value of the never-reinvested portfolio including the dividends piled up as cash.

What a DRIP actually is

A dividend reinvestment plan (DRIP) automatically uses every dividend a stock or fund pays you to buy more of that same stock or fund, usually including fractional shares, usually with no commission. Instead of a $30 dividend landing in your cash balance, it becomes 0.3 more shares at $100 each — and those 0.3 shares pay their own dividends next quarter.

That last part is the whole trick. Without reinvestment, your share count is frozen: 100 shares today, 100 shares in twenty years. With reinvestment, the share count itself compounds — each payment slightly raises the next payment, which buys slightly more stock, and over decades the gap between the two paths gets dramatic. It is the same compound-interest math as a savings account, except the “interest” is paid in shares whose price and payout can also grow.

There are two ways to run one:

• Brokerage DRIP — a checkbox at your broker (Fidelity, Schwab, Vanguard, most others). Dividends from any enrolled stock or ETF buy more of it automatically, in fractional shares, free. This is what almost everyone should use, and it is the model this calculator assumes.
• Company-operated DRIP — run by the company through its transfer agent (Computershare, Equiniti). You enroll directly with the plan. Some plans add perks a broker cannot: shares issued at a small discount (typically 1–5% where offered) or optional cash purchases with no commission. The trade-off is more paperwork, one plan per company, and no ETFs.

How the calculator works

The model steps through every dividend payment date rather than jumping year to year, because reinvesting quarterly genuinely compounds faster than reinvesting the same total once a year. At each payment:

Both annual growth rates are converted to per-period rates with the exponent 1/n (n = payments per year), so 6% a year is exactly 6% a year whether paid monthly or quarterly. If you enter the dividend as a yield, it is converted once at the start: annual dividend per share = share price × yield. After that the dividend grows at its own rate, independent of the price — which is why a stock’s yield on cost drifts up over time even as its quoted yield stays put.

Two simulations run in parallel — identical except one reinvests and one banks the cash — and both are drawn on the chart, so the “DRIP premium” you see is an apples-to-apples comparison, not a trick of different assumptions.

Worked example 1 — a broad-market, S&P-style holding

Say you put $10,000 into an index-style holding at $100 a share: a 1.2% yield ($1.20 per share per year, close to the S&P 500’s current yield of roughly 1.0–1.1% — see the sources at the bottom), paid quarterly, with both dividends and share price growing 6% a year, held for 25 years, no extra contributions.

The first quarterly dividend is 100 shares × $0.30 = $30.00, which buys 0.3 more shares at $100. Tiny. But repeated 100 times with growing payouts and a growing share count:

• With reinvestment: 134.93 shares worth $57,908, having collected $8,112 in dividends along the way, with dividend income now running at $695 a year — a 6.9% yield on your original cost.
• Without reinvestment: still 100 shares, worth $42,919, plus $6,730 in accumulated cash dividends = $49,649.

Reinvesting added $8,259 (about 17% more) — from a stock yielding barely 1%. The lesson: even at low yields, the DRIP premium is real, it just takes decades to show.

Worked example 2 — a high-yield holding

Now a slower-growth income stock: $10,000 at $50 a share, a 6% yield ($3.00 per share), quarterly, dividends and price each growing just 2% a year, held 20 years.

The first dividend is 200 shares × $0.75 = $150.00, buying 3 whole extra shares immediately. Here the share count snowballs fast:

• With reinvestment: 658.13 shares — more than triple the original 200 — worth $48,898, with $29,119 of total dividends collected and income now at $2,934 a year (a 29% yield on cost).
• Without reinvestment: 200 shares plus $14,687 of cash = $29,547.

Reinvesting added $19,351 — about 65% more. High yield plus reinvestment is where DRIP math is most dramatic, which is also why it deserves the most scrutiny: a 6% yield that gets cut in year 8 breaks the projection. Growth assumptions matter more than the calculator’s precision.

Practical guidance

• Use the company’s real dividend history for the growth rate, not hope. Five- and ten-year dividend CAGRs are on every broker’s quote page. High current yield usually means low future growth — model it that way.
• Fractional shares matter more than they look. Before brokers supported them, small dividends sat idle as cash until they could afford a whole share. Every major US broker now reinvests fractionally, so the model here assumes every dollar goes back in immediately.
• DRIP in taxable accounts creates bookkeeping. Every reinvestment is a new tax lot with its own cost basis. Brokers track this for you now, but it is one reason some investors reinvest only inside IRAs/401(k)s.
• Reinvesting is not automatically optimal. It doubles down on one holding. Many investors take dividends as cash and redirect them to whatever is underweight — same compounding, better balance. The “taken as cash” line here assumes the cash sits idle, which is the worst case; reinvested elsewhere at similar returns, the gap mostly closes.
• Taxes are owed either way. A DRIP does not defer tax — see the FAQ below.

Everything on this page is general information and math, not financial or tax advice. Talk to a licensed adviser about your own situation.

FAQ