Dividend Reinvestment (DRIP) Calculator
A Dividend Reinvestment Plan (DRIP) automatically purchases additional shares with each dividend payment, compounding your returns over time. This calculator shows how much a stock position grows when dividends are reinvested versus taken as cash. Enter your initial investment, share price, annual dividend yield, expected annual price appreciation, optional dividend growth rate, and investment horizon. The calculator simulates year-by-year compounding: dividends earned each year are divided by the share price to buy fractional shares, increasing the share count for the following year. Final value includes both share price appreciation and the extra shares accumulated through reinvestment.
DRIP formula
Each year: shares += dividends_earned / share_price
dividends_earned = shares * share_price * yield
share_price *= (1 + price_growth)
yield *= (1 + dividend_growth)
FV = shares * final_share_price
The process repeats for each year of the investment horizon. Without DRIP, only price appreciation applies to the original shares.
Why dividend reinvestment works
- Each reinvested dividend buys more shares, increasing the dividend paid in subsequent years.
- Over 20 or 30 years the compounding effect can double or triple total returns versus taking cash dividends.
- Many brokers and transfer agents offer DRIPs with no commission, sometimes at a discount to market price.
- Qualified dividends from US corporations and many ETFs are taxed at preferential capital gains rates (0%, 15%, or 20%).
- DRIPs are most powerful in tax-advantaged accounts (IRA, 401(k)) where dividends compound without annual tax drag.
Frequently asked questions
What is a DRIP?
A Dividend Reinvestment Plan (DRIP) automatically uses dividend payments to purchase additional shares of the same stock or fund instead of paying cash to the investor. Over time this compounds returns because each new share also earns dividends.
How does dividend reinvestment compound wealth?
Each dividend payment buys more shares. Those shares then generate their own dividends next period, which buy even more shares. This compounding effect can significantly increase the value of a position compared to taking dividends as cash.
Does this calculator account for dividend growth?
Yes. If you enter an annual dividend growth rate, the calculator increases the dividend per share each year by that percentage, reflecting the common pattern of dividend-growing companies.
Are taxes on dividends included?
No. This calculator shows pre-tax growth. Qualified dividends are taxed at 0%, 15%, or 20% depending on your income. Consult the IRS for current rates. Taxes would reduce the effective reinvestment amount.
What is a realistic dividend yield to enter?
The S&P 500 historically yields around 1.5 to 2% annually. High-dividend stocks or funds may yield 3 to 6%. Enter the current forward yield shown on the security's fact sheet or as reported by the issuer.
Official sources
- U.S. Securities and Exchange Commission: Dividend Reinvestment Plans.
- IRS: Topic 404 - Dividends.
Reviewed by the CalculatorHub team, edited by James Graham, 15 June 2026. See our methodology.