Reviewed November 2026 · Estimate only, not financial advice.
Reinvesting dividends buys more shares, which pay more dividends, which buy more shares. Enter your starting shares, price, dividend yield and price growth, and compare the ending value with reinvestment against taking the dividends as cash.
How This DRIP Calculator Works
Each year, the shares pay a dividend equal to the yield times the current share price. With reinvestment, that cash buys new shares at the current price; without it, the cash is kept and the share count stays the same. In both cases the share price grows by the annual growth rate each year.
Each year: dividend = shares × price × yield; new shares = dividend ÷ price; price ×= (1 + growth)
With DRIP, shares compound. Without DRIP, shares stay constant and dividends accumulate as cash. Starting value = shares × price.
Worked example: 100 shares at $50 ($5,000), 4% dividend yield, 8% annual price growth, 10 years. With reinvestment you end with 148.02 shares at $107.95 = $15,978.68. Without it you keep 100 shares worth $10,794.62 plus $2,897.31 of cash dividends = $13,691.94. The DRIP advantage is $2,286.74.
Practical tips
The advantage grows with time.Over 10 years the DRIP edge is about 17% here; over 30 years it roughly doubles the ending value. Reinvestment is a long-game strategy.
Yield and growth both compound.A high yield with no price growth still compounds through share count; a high growth rate with no yield compounds through price. The combination is the strongest.
Reinvested dividends are still taxed.In a taxable account, dividends are taxed in the year received — even when reinvested. Hold dividend stocks in a tax-advantaged account where possible.
DRIP does not fix a bad stock.Reinvesting into a falling company buys more of a falling asset. The model assumes steady growth; check the business, not just the yield.
Frequently Asked Questions
What is a DRIP?
A Dividend Reinvestment Plan automatically uses the dividends a stock pays to buy more shares of the same stock, instead of paying the cash out to you.
Why does reinvesting beat taking cash?
Each reinvested dividend buys shares that pay future dividends, so the share count — and the income — compounds. Over decades the difference is often larger than the price gain itself.
Do I pay tax on reinvested dividends?
Yes, in a taxable account: dividends are taxable income in the year they are paid, whether you take them as cash or reinvest them. In a Roth IRA or 401(k) they grow tax-deferred or tax-free.
What if the share price falls?
Reinvestment then buys more shares per dividend dollar, which helps when the price recovers. But if the dividend is cut or the company declines permanently, reinvestment cannot save the investment.
Does this model assume the yield stays constant?
Yes — the dividend yield and the price growth rate are held fixed for the whole period. Real yields move; treat the result as a scenario, not a forecast.
Is this financial advice?
No. This is a planning estimate only, not financial advice.
