Dividend Reinvestment Calculator
Take the dividends as cash, or plow them back into more shares? Run the exact share-by-share math and watch the two paths diverge.
Your inputs
Total wealth over time
Year-by-year breakdown
| Year | DRIP shares | DRIP wealth | Cash-path wealth |
|---|
What dividend reinvestment actually does
Every dividend is a choice: cash in hand, or more shares. Reinvesting buys shares_t = shares_{t-1} × (1 + dividend_t ÷ price_t) — each year's payout purchases new shares at that year's price, and next year's (grown) dividend lands on a bigger share count. Two compounding engines run at once: the price climbs and the share count climbs. Taking cash runs only the price engine, and the dividends sit on the sidelines earning nothing.
The math behind this calculator
An exact share-based simulation with annual steps. The model starts from a reference share price of $100 — the wealth results don't depend on it, only the ratios do.
Dividend in year t = $100 × yield × (1 + dividend growth)^t
DRIP: shares_t = shares_{t-1} × (1 + dividend_t ÷ price_t)
Cash path: wealth = shares₀ × price_t + all dividends received
Worked example
$10,000 at a 4% yield, dividends growing 6% a year, shares appreciating 7% a year, 20 years. Year 1: the $100 share pays $4.24 and trades at $107 — reinvesting buys 4.24 ÷ 107 ≈ 0.0396 extra shares per share owned. Fast-forward: the DRIP path ends at roughly $78,950 (204 shares) versus $54,294 taking cash ($38,697 of stock + $15,597 of dividends received). Reinvesting adds $24,656 — 45% more wealth — and the final year's dividend income alone is about $2,617.
The tax catch
Here's the part DRIP marketing skips: in a taxable brokerage account, reinvested dividends are taxed exactly like cash dividends — in the year they're paid, usually at the qualified-dividend rates of 0%, 15%, or 20%. You pay tax on money you never saw. The consolation is real but delayed: every reinvestment raises your cost basis, so you won't be taxed a second time when you sell. Inside an IRA or 401(k) none of this applies — dividends compound tax-free until withdrawal. This calculator shows pre-tax wealth; your after-tax result in a taxable account will be lower on both paths.
Caveats worth knowing
- Constant growth is a fantasy. Real dividends get cut in recessions and real prices don't rise 7% every year. The model is a clean-room comparison of the two strategies, not a prediction.
- Cuts compound against you too. Set dividend growth negative and watch the DRIP advantage shrink — a shrinking payout buys fewer shares, which shrinks next year's payout.
- Scale-invariant. The $100 reference price is arbitrary; only the yield, growth rates, and time horizon drive the result.
Sources: IRS Topic 404 — dividends; Investor.gov — dividend reinvestment plans.