Dividend Reinvestment (DRIP) Calculator

DRIP Basics (Quick, Friendly Math)

Dividend reinvestment compounds in two ways: (1) dividends buy more shares, and (2) those extra shares generate more dividends next time. This calculator lets you start from a lump sum or from an existing share count, choose either a yield model (annual % of price) or a dividend-per-share model, and add realistic details like dividend growth, price growth, tax, and monthly top-ups. We support fractional shares and multiple payout schedules (monthly, quarterly, semi-annual, annual).

• Yield mode: annual dividend scales with price to keep yield near your chosen %; dividend growth raises that yield over time.
• DPS mode: annual dividend per share grows independently of price; yield will vary as price changes.
• Taxes: we deduct your dividend tax rate before reinvesting (if DRIP is on) or add it to cash (if DRIP is off).
• Run-rate income: we show an annualized income estimate at the end based on the final dividend per share and share count.

Educational only—this is not financial advice. Fees, trading costs, ex-div dates, and withholdings may vary by account and jurisdiction.

Dividend Reinvestment (DRIP): What It Is, How It Works, and When to Use It

A Dividend Reinvestment Plan (DRIP) turns cash dividends into more shares automatically. Instead of paying dividends to your cash balance, a DRIP uses that money to buy additional shares—often including fractional shares—so your share count grows over time. That extra ownership then earns future dividends, creating a simple feedback loop of compounding.

Key ideas in plain English

• Yield vs. DPS: Dividend yield is the annual dividend as a % of share price. Dividend per share (DPS) is the cash per share paid each year. Yield moves with price; DPS moves when the company changes the payout.
• Growth matters: Over long horizons, both dividend growth and price growth influence your outcome. DRIP compounding is powerful when DPS trends upward.
• Frequency: Companies pay on different schedules—monthly, quarterly, semi-annual, or annual. More frequent payouts mean more frequent reinvestment.
• Taxes & wrappers: Many investors pay tax on dividends. DRIP typically reinvests after-tax cash unless you’re in a tax-advantaged account. Withholding taxes can apply to foreign dividends.
• Fractional shares: Modern brokers often allow fractional DRIPs, so every payment is put to work instead of waiting for a whole share.

How DRIP grows your income

Think of two engines: (1) your share count increases as dividends buy more shares, and (2) each share may pay a larger dividend over time if DPS grows. After enough cycles, your run-rate income (annualized dividend at the current DPS and share count) can become meaningfully larger than at the start.

Yield on cost (YOC) is a popular lens: YOC = annual dividend income ÷ total cash invested. It rises when DPS increases and when your share count expands through DRIP and contributions. It is based on your historic cost, not today’s price—useful for motivation, but not a valuation metric.

What this calculator assumes

• Clean schedule: Payouts occur on a regular monthly/quarterly/semi-annual/annual cadence. Real-world ex-dividend, record, and pay dates may drift.
• Stable growth inputs: You choose annual growth rates for price and dividend. The tool compounds them smoothly; companies change DPS discretely and unpredictably in reality.
• Reinvest at market price: DRIP purchases are assumed at the prevailing price. Some issuers/brokers offer small DRIP discounts; fees and slippage vary.
• Net of tax: If you set a tax rate, we deduct it from each dividend before reinvestment (or add it to cash if DRIP is off).
• Fractional shares allowed: Many platforms support them; if yours does not, real outcomes may be slightly lower due to idle cash.

When DRIP can shine—and when to pause it

• Long horizon: DRIP compounds best over multi-year periods when you won’t need the income immediately.
• Low costs: Minimal fees help more of each payment become ownership.
• Diversification: Concentrated DRIP into a single stock amplifies company-specific risk. Many investors DRIP broad funds instead.
• Valuation awareness: DRIP buys every period regardless of price. If you prefer to allocate selectively (e.g., when a stock looks expensive), you might turn DRIP off and direct dividends manually.

Practical tips

• Pick a mode: Use Yield mode if you’re thinking in % terms; use DPS mode when you’re tracking an actual payout per share from company materials.
• Stress-test growth: Try lower dividend growth or flat prices to see a downside path. Reality is lumpy; plans survive better when tested.
• Add contributions: Small monthly top-ups accelerate compounding, especially early on.
• Mind taxes & wrappers: If you receive foreign dividends, model a withholding rate. Check whether your account type affects tax treatment.

Limitations and reminders

This is an educational model. It does not predict prices, dividend policies, or tax law. Corporate actions (splits, suspensions, scrip dividends), fees, FX rates, and timing differences are not fully represented. Treat results as estimates, not promises.

Educational note: Investments can go down as well as up, and dividends can be reduced or cancelled. This tool does not provide financial advice. Consider diversification, costs, taxes, and your risk tolerance. If you need guidance for your circumstances, seek regulated advice.