DRIP Calculator

DRIP stands for dividend reinvestment plan. Instead of paying dividends out as cash, a DRIP automatically uses them to buy more shares of the same stock or fund, often including fractional shares so the full amount is invested.

The extra shares your dividends buy pay dividends of their own, so your income grows even if the company never raises its payout. With the default inputs here ($10,000, a 4% yield, no dividend growth, 20 years), reinvesting ends near $21,911, compared with $18,000 if the dividends are taken as cash.

Reinvesting doesn't avoid the tax. In a taxable account, reinvested dividends are generally taxed in the year they're paid, as if you had received the cash. Dividends inside tax-advantaged accounts such as IRAs are generally treated differently. Turn on the tax drag option in advanced settings for a rough estimate, or use the Dividend Tax Calculator for a precise one — this isn't tax advice.

By default it assumes the share price stays flat and doesn't include taxes or fees, so results show the compounding effect in isolation. The advanced options let you add an expected share price growth rate for a total-return view, and a simple tax drag estimate — but trading fees still aren't modeled, and results remain an estimate, not a forecast.

Leave it at 0% for the most conservative estimate, which assumes a flat payout. If you want to model growth, base it on the company's or fund's actual history of dividend increases, and remember that past increases don't guarantee future ones. Small changes compound quickly over 20 or 30 years, so try a few lower values.

Not always. Reinvesting tends to grow a position faster over long periods, but if you need the income to live on, taking cash is a perfectly reasonable choice. Reinvesting also puts more of your money into the same holding, and if the share price falls, the reinvested shares lose value too.

By default the calculator isolates the dividend reinvestment effect by holding price flat, which is the more conservative and easier-to-reason-about view. Turning on the share price growth rate in advanced options adds expected capital appreciation on top, giving a total-return estimate closer to what you might actually expect from a growing company — at the cost of resting on an extra assumption that's harder to predict than the dividend itself.

When you mark the account as taxable and set a tax rate, that percentage is deducted from each year's dividend before it's reinvented or counted as cash — a rough approximation of paying tax on dividend income as it's received. It uses a single flat rate rather than modeling qualified vs. ordinary dividends or your specific bracket; for that level of detail, use the Dividend Tax Calculator.

For each year it lists your contributions, the dividends reinvested into the DRIP balance, the running DRIP balance, the dividends collected as cash instead, and the running cash-path balance. The highlighted row is the first year your reinvested dividends alone reach the monthly income milestone shown above the chart. You can download the whole table as a CSV.