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Dividend Reinvestment Calculator

Dividend reinvestment (DRIP) compounds returns by using dividend payouts to purchase additional shares, which then generate their own dividends in future periods. The projected portfolio value depends on the initial investment, share price, annual dividend per share, the dividend growth rate, and the expected share price growth rate. For example, a $10,000 investment at $50 per share with a $2.00 annual dividend, 5% dividend growth, and 7% price growth over 20 years grows to an estimated $48,754 with approximately 280 total shares, compared to $38,697 without reinvestment. Enter your investment details below to see a year-by-year DRIP projection.

Quick Answer

A $10,000 investment at $50/share with a $2.00 annual dividend, 5% dividend growth, and 7% price appreciation grows to an estimated $48,754 after 20 years with dividends reinvested, accumulating approximately 280 shares.

Common Examples

Input Result
$10,000 at $50/share, $2.00 dividend, 5% div growth, 7% price growth, 10 years Estimated $23,360 final value, approximately 214 shares
$10,000 at $50/share, $2.00 dividend, 5% div growth, 7% price growth, 20 years Estimated $48,754 final value, approximately 280 shares
$25,000 at $100/share, $3.50 dividend, 6% div growth, 8% price growth, 15 years Estimated $100,685 final value, approximately 327 shares
$5,000 at $25/share, $1.00 dividend, 3% div growth, 5% price growth, 30 years Estimated $27,891 final value, approximately 514 shares
$50,000 at $150/share, $4.00 dividend, 4% div growth, 6% price growth, 10 years Estimated $102,427 final value, approximately 381 shares

How It Works

This calculator simulates year-by-year dividend reinvestment using the following steps for each year:

  1. Grow share price: New Price = Previous Price x (1 + Price Growth Rate / 100)
  2. Grow dividend: New Dividend = Previous Dividend x (1 + Dividend Growth Rate / 100)
  3. Calculate annual dividends: Annual Dividends = Current Shares x New Dividend Per Share
  4. Reinvest dividends: New Shares Purchased = Annual Dividends / New Share Price
  5. Update total shares: Total Shares = Previous Shares + New Shares Purchased
  6. Calculate portfolio value: Portfolio Value = Total Shares x Current Share Price

The annualized return is calculated using the CAGR formula: (Final Value / Initial Investment)^(1/years) - 1.

Worked Example

For a $10,000 investment at $50/share with a $2.00 annual dividend, 5% dividend growth, and 7% price appreciation:

Starting: 200 shares at $50 = $10,000.

Year 1: Share price = $50 x 1.07 = $53.50. Dividend = $2.00 x 1.05 = $2.10. Annual dividends = 200 x $2.10 = $420. New shares = $420 / $53.50 = 7.850 shares. Total shares = 207.850. Portfolio value = 207.850 x $53.50 = $11,120.

Year 2: Share price = $53.50 x 1.07 = $57.25. Dividend = $2.10 x 1.05 = $2.205. Annual dividends = 207.850 x $2.205 = $458.31. New shares = $458.31 / $57.25 = 8.006. Total shares = 215.856. Portfolio value = 215.856 x $57.25 = $12,358.

This compounding process continues year after year. The key insight is that reinvested dividends purchase additional shares, which generate additional dividends in subsequent years, creating a compounding effect that accelerates growth over time.

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Frequently Asked Questions

What is a DRIP?
DRIP stands for Dividend Reinvestment Plan. It is a program that automatically uses dividend payouts to purchase additional shares of the same stock or fund instead of distributing cash. Many brokerages and companies offer DRIP programs, often with no transaction fees and the ability to purchase fractional shares.
How does dividend reinvestment compare to taking cash dividends?
Reinvesting dividends allows you to accumulate more shares over time, which compounds both price appreciation and future dividend income. Taking dividends as cash provides immediate income but forfeits the compounding growth. Over long time periods, the difference can be substantial. This calculator illustrates the reinvestment scenario only.
What dividend growth rate should I use?
Historical dividend growth rates for large US companies have averaged approximately 5% to 7% per year. Individual companies vary widely. Dividend aristocrats (companies that have increased dividends for 25+ consecutive years) have historically grown dividends at 6% to 10% per year. Past growth does not guarantee future increases.
Does this account for taxes on dividends?
No. Dividends are generally taxable in the year they are received, even when reinvested. Qualified dividends are taxed at the long-term capital gains rate (0%, 15%, or 20%), while non-qualified dividends are taxed at ordinary income rates. The projections shown here are pre-tax estimates. Actual after-tax results will be lower.
Can I use this for ETFs and mutual funds?
Yes. This calculator works for any investment that pays regular dividends or distributions, including individual stocks, ETFs, and mutual funds. For ETFs and mutual funds, use the distribution per share as the annual dividend amount.