DRIP Calculator
Calculate how dividend reinvestment compounds your portfolio over time. See shares accumulated, total dividends received, and year-by-year growth.
Quick Answer
A Dividend Reinvestment Plan (DRIP) automatically uses your dividends to buy more shares. With 100 shares at $50/share paying a $2.00 annual dividend growing at 5% per year, reinvesting for 20 years grows your position to over 160 shares with a portfolio value exceeding $13,000 from an initial $5,000 investment.
Dividend yield: 4.00%
DRIP Projection
Initial Investment vs. Growth
Year-by-Year Growth
| Year | Shares | Div/Share | Annual Div | Shares Added | Portfolio Value |
|---|---|---|---|---|---|
| Year 1 | 100.00 | $2.00 | $200.00 | +4.00 | $5,200 |
| Year 2 | 104.00 | $2.10 | $218.40 | +4.16 | $5,678 |
| Year 3 | 108.16 | $2.21 | $238.49 | +4.33 | $6,201 |
| Year 4 | 112.49 | $2.32 | $260.43 | +4.50 | $6,771 |
| Year 5 | 116.99 | $2.43 | $284.39 | +4.68 | $7,394 |
| Year 6 | 121.67 | $2.55 | $310.56 | +4.87 | $8,075 |
| Year 7 | 126.53 | $2.68 | $339.13 | +5.06 | $8,817 |
| Year 8 | 131.59 | $2.81 | $370.33 | +5.26 | $9,629 |
| Year 9 | 136.86 | $2.95 | $404.40 | +5.47 | $10,514 |
| Year 10 | 142.33 | $3.10 | $441.60 | +5.69 | $11,482 |
| Year 11 | 148.02 | $3.26 | $482.23 | +5.92 | $12,538 |
| Year 12 | 153.95 | $3.42 | $526.60 | +6.16 | $13,692 |
| Year 13 | 160.10 | $3.59 | $575.04 | +6.40 | $14,951 |
| Year 14 | 166.51 | $3.77 | $627.95 | +6.66 | $16,327 |
| Year 15 | 173.17 | $3.96 | $685.72 | +6.93 | $17,829 |
| Year 16 | 180.09 | $4.16 | $748.81 | +7.20 | $19,469 |
| Year 17 | 187.30 | $4.37 | $817.70 | +7.49 | $21,260 |
| Year 18 | 194.79 | $4.58 | $892.92 | +7.79 | $23,216 |
| Year 19 | 202.58 | $4.81 | $975.07 | +8.10 | $25,352 |
| Year 20 | 210.68 | $5.05 | $1,064.78 | +8.43 | $27,684 |
About This Tool
The DRIP Calculator (Dividend Reinvestment Plan Calculator) projects how automatically reinvesting your dividends compounds your portfolio over time. Dividend reinvestment is one of the most powerful wealth-building strategies available to individual investors because it harnesses the compound effect of using dividends to purchase additional shares, which then generate their own dividends, creating an accelerating cycle of growth.
How Dividend Reinvestment Plans Work
When a company pays dividends, you normally receive cash in your brokerage account. With a DRIP, those cash dividends are automatically used to purchase additional shares of the same stock or fund. Most brokerages now support fractional shares, so every penny of your dividend gets reinvested. For example, if you own 100 shares of a stock paying $2.00 per share annually, you receive $200 in dividends. If the stock trades at $50, your DRIP buys 4 additional shares, bringing your total to 104 shares. Next year, those 104 shares generate $208 in dividends, buying even more shares. This compounding effect accelerates significantly over long periods.
The Power of Dividend Growth
The real magic of DRIP investing comes from dividend growth. Companies that consistently increase their dividends, often called Dividend Aristocrats (25+ consecutive years of increases) or Dividend Kings (50+ years), provide investors with a growing income stream that amplifies the reinvestment effect. A stock yielding just 3% today might be yielding 10% or more on your original investment after 20 years of 8% annual dividend growth. When these growing dividends are automatically reinvested, the number of shares you own accelerates dramatically. The calculator models this growth to show you the full compounding potential.
Choosing Dividend Growth Rate
The dividend growth rate you input should reflect the historical pattern or reasonable expectations for your specific investment. Dividend Aristocrats typically grow their dividends at 5-10% annually. Utilities and REITs often grow at 2-5%. High-growth dividend payers might increase at 10-15%, though this rate usually slows as companies mature. For conservative projections, use a rate lower than the company recent history. The S&P 500 Dividend Aristocrats index has averaged roughly 8-10% annual dividend growth over the past two decades, providing a useful benchmark for a diversified dividend portfolio.
DRIP vs. Taking Dividends as Cash
Whether to reinvest or take cash depends on your financial stage. Younger investors in the accumulation phase benefit enormously from reinvestment because they have the time horizon to let compounding work. A 30-year-old reinvesting dividends for 30 years can end up with two to three times more shares than they originally purchased. Retirees, however, may prefer to take dividends as cash for living expenses. The calculator helps you understand the opportunity cost of each approach by showing the long-term growth potential of reinvestment. Even partial reinvestment, where you reinvest dividends from some holdings while taking cash from others, can be an effective hybrid strategy.
Tax Implications of DRIP Investing
An important consideration often overlooked by new DRIP investors is that reinvested dividends are still taxable in the year they are received, even though you never see the cash. Qualified dividends are taxed at favorable long-term capital gains rates (0%, 15%, or 20% depending on your income), while non-qualified dividends are taxed as ordinary income. To maximize the DRIP strategy, consider holding dividend stocks in tax-advantaged accounts like IRAs or 401(k)s where reinvested dividends grow tax-deferred or tax-free. In taxable accounts, keep meticulous records of each reinvestment purchase for accurate cost basis reporting when you eventually sell.
Best Stocks and Funds for DRIP Strategies
The ideal DRIP candidates are companies or funds with a strong history of paying and growing dividends, sustainable payout ratios (below 60% for most sectors), and competitive yields. Popular choices include Dividend Aristocrats like Johnson & Johnson, Procter & Gamble, and Coca-Cola. For diversification, dividend-focused ETFs like VIG (Vanguard Dividend Appreciation), SCHD (Schwab US Dividend Equity), or NOBL (ProShares S&P 500 Dividend Aristocrats) provide exposure to dozens of dividend growers in a single fund. REITs like Realty Income (O), which pays monthly dividends, are also popular DRIP choices for their higher yields and frequent compounding opportunities.