Dividend Reinvestment Calculator
Project the growth of a portfolio where every dividend is reinvested to buy more shares — with dividend growth, price appreciation, and tax drag all modeled month by month.
How dividend reinvestment compounds
Each month the calculator: (1) adds your contribution at the start of the month, (2) computes that month's dividend as portfolio × annual yield ÷ 12, (3) subtracts your dividend tax rate, (4) reinvests the net dividend into more shares, (5) applies one month of share price growth, then (6) ratchets the yield up by the dividend growth rate for next month.
Over 20+ year horizons, the reinvested-dividends-buying-more-shares loop usually accounts for more of the final value than your original contributions or the price growth alone. That's why dividend investors talk about "yield on cost" — the dividend stream grows beyond the original yield because reinvested dividends also pay dividends.
Toggle DRIP off to see how much of the projected gain depends on reinvestment versus pure price growth + cash dividends.
Frequently asked questions
- What is a DRIP and how does dividend reinvestment work?
- A Dividend Reinvestment Plan (DRIP) automatically uses each cash dividend to buy more shares of the same stock — usually commission-free and including fractional shares. Over time, the new shares pay their own dividends, which buy more shares, which pay more dividends. This is the compounding loop that makes long-hold dividend investing so effective.
- How does this DRIP calculator differ from a plain dividend calculator?
- The DRIP calculator specifically models dividend reinvestment as the primary growth engine. You can toggle DRIP off to see "take dividends as cash" instead. Both versions account for share price appreciation, dividend growth (the rate at which the per-share dividend increases each year), and tax drag on dividends before reinvestment.
- What yield, dividend growth, and price growth should I assume?
- A balanced dividend portfolio (e.g., SCHD-like) historically yields 3–4% with 5–8% annual dividend growth and 4–7% price growth. High-yield ETFs (JEPI, QYLD) yield 7–12% but often have lower or negative price growth. Match your assumptions to the actual stock or ETF — the past 5-year averages are usually published on the issuer's site.
- How do taxes affect a DRIP?
- In a taxable account, qualified dividends are taxed at long-term capital gains rates (0%, 15%, or 20% federal in the US) and non-qualified at ordinary income rates. The tax is owed each year as dividends are received — even if you immediately reinvest them. This calculator applies your tax rate before reinvestment so you see realistic compounded growth. In tax-advantaged accounts (IRA, 401k), set the tax rate to 0%.
- What's "yield on cost" and why does it matter?
- "Yield on cost" is your current annual dividend income divided by your original cost basis. As dividends grow over time, yield on cost grows too — a stock you bought at 4% yield with 5% annual dividend growth has 6.5% yield on cost after 10 years, even if its market yield is still 4%. It's the metric long-term dividend investors track most closely.
- Is dividend reinvestment always the right choice?
- Not always. In retirement (when you need the cash for living expenses), turning DRIP off makes sense. If your portfolio is concentrated in one stock, DRIP increases concentration further. For tax-loss harvesting purposes, DRIP may complicate wash-sale rules. Default to DRIP during accumulation; turn it off when income matters more than growth.