How the DRIP calculator works
A Dividend Reinvestment Plan (DRIP) automatically uses your dividend payments to buy more shares instead of paying them out as cash. This calculator simulates that process one dividend period at a time (quarterly by default), the same style of period-by-period simulation used in our FIRE and Retirement calculators.
Each period, the dividend paid is Shares × Dividend Per Share, and that full amount
buys Dividend Paid / Current Share Price additional shares — including fractional
shares, which is how real DRIP programs work. After each period, the share price grows toward your
annual appreciation rate, and the dividend per share grows toward your annual dividend growth rate,
both compounded smoothly across however many payments happen per year.
To make the benefit concrete, the calculator also runs the same scenario without reinvesting: your share count stays fixed at the starting amount, and every dividend is instead collected as cash and simply held, uninvested, for the rest of the period. The DRIP advantage is the difference between the two final outcomes.
Worked example
Suppose you invest $10,000 at $50 per share (200 shares), in a stock yielding 3% annually, with dividends growing 5% a year and the share price appreciating 7% a year, paid quarterly, held for 20 years.
With dividends reinvested every quarter, your share count grows to 329.54 shares, and your final portfolio value reaches $63,760.84 — having reinvested $13,795.00 in dividends along the way.
Without reinvesting — collecting the same growing dividend stream as cash and simply holding it — your final value would be $48,800.74 instead: the same 200 shares at the same final price, plus the uninvested cash dividends. That's a $14,960.10 difference — roughly a 31% uplift purely from letting dividends buy more shares along the way.
Common mistakes to avoid
1. Assuming dividend yield and price appreciation always move together
This calculator treats dividend growth and price appreciation as independent assumptions, because they are — a company can raise its dividend steadily while its stock price stagnates, or vice versa. Don't assume a high dividend growth rate implies similarly strong price gains, or the reverse.
2. Forgetting that "without reinvesting" here means the cash earns nothing
The comparison row assumes uninvested cash dividends, not cash parked in a savings account or reinvested elsewhere. If you'd actually put those dividends to work in some other investment, the real gap between reinvesting in the same stock and not would typically be smaller than this calculator shows.
3. Ignoring taxes on reinvested dividends in a taxable account
Reinvested dividends are still taxable income in the year they're paid in a standard brokerage account — reinvesting doesn't shelter them from tax the way a retirement account might. This calculator shows pre-tax growth only, so your actual after-tax result would be lower.