Dividend Reinvestment (DRIP) Calculator
A Dividend Reinvestment Plan (DRIP) uses the dividends you earn to automatically buy more shares of the stock. This creates a powerful compounding effect. This calculator simulates how your investment can grow over time by factoring in reinvested dividends and share price appreciation.
Projected Growth
How the Dividend Reinvestment Calculator Works
Our Dividend Reinvestment Calculator uses a detailed, period-by-period simulation to show how your investment can grow over time when dividends are automatically reinvested. This approach is ideal for long-term investors who want to understand the true power of compounding through Dividend Reinvestment Plans (DRIPs).
Here’s the step-by-step process behind the calculation:
- Dividend Calculation: For each payout period (e.g., quarterly, monthly, or annually), the calculator determines the total dividend earned based on your current number of shares and the stated dividend yield.
- Reinvestment of Dividends: The dividend amount is immediately used to purchase additional shares, including fractional shares, at the current market price.
- Share Count Update: The newly purchased shares are added to your existing total, increasing your ownership stake.
- Price Growth Adjustment: The share price is then adjusted based on the expected annual growth rate, simulating realistic market appreciation.
- Ongoing Compounding: This process repeats for the entire investment duration you specify, demonstrating how reinvesting dividends can accelerate wealth growth over time.
By using this reinvestment model, the calculator gives a more accurate picture of your potential returns compared to simple interest or non-reinvested dividend scenarios.
Dividend Reinvestment Calculator – Frequently Asked Questions
What does "Dividend Payouts Per Year" mean?
This refers to how many times a company pays dividends within a single year. For example:
- Quarterly (4 times per year): The most common schedule for U.S. stocks.
- Monthly (12 times per year): Often seen with REITs and certain income-focused ETFs.
- Semi-Annually (2 times per year): Common among some international companies.
- Annually (1 time per year): Often used by smaller or international firms.
The more frequent the payouts, the faster compounding can occur—especially when dividends are reinvested.
Does this calculator account for taxes on dividends?
No. This simulation assumes all dividends are reinvested in a tax-sheltered account such as an IRA, Roth IRA, or 401(k), where dividends are not taxed immediately.
In a taxable brokerage account, you would owe taxes on dividends received, even if they are automatically reinvested, which could reduce the amount of money available to purchase new shares.
For the most accurate real-world results, consider your specific tax situation when interpreting the calculator's output.