DRIP Calculator

DRIP stands for dividend reinvestment plan. Instead of the cash dividends landing in your account for you to spend, they are automatically used to buy more shares of the same company — often including fractional shares, so every cent goes back to work.

The reason this matters is simple: those new shares pay dividends too. In year one you earn dividends on the money you invested. In year two you earn dividends on your original money plus the shares your first year of dividends bought. Repeat that for a decade or two and your income grows even if the company never raises its payout, because you own steadily more of it. That snowball effect is compounding.

Taking dividends as cash is not wrong — retirees usually want the income. But the difference over long stretches is large. The chart above shows both paths side by side: the reinvested line curves upward while the cash line rises in a straight, predictable slope. Add a rising dividend on top, and the gap widens further. These are simplified estimates that assume a steady share price and a dividend that keeps being paid — real markets move, and companies can cut payouts.