Dividend Reinvestment (DRIP) Calculator
↻ Updated 2026See how reinvesting dividends compounds a stock position over time. Compare a DRIP against taking dividends as cash, with dividend and price growth built in.
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How to read your DRIP projection
The defaults turn 100 shares into 221.5 without a dollar of new money — the dividends bought 121.5 shares over twenty years. Ending value is $24,267 with reinvestment against $10,956 without it, but that second number is a position value, not a comparison: it quietly leaves out the $6,437 of cash the non-reinvestor was handed.
How dividend reinvestment compounds a share count
A DRIP compounds shares rather than dollars. Each year the dividend arrives as cash, immediately buys more shares at the prevailing price, and those shares pay their own dividend the following year. Two things grow at once — the number of shares and the dividend each share pays — which is why the curve steepens even when the stock does nothing dramatic.
The model runs one loop per year, in a specific order: the share price grows first, then the dividend is paid on the shares held at the start of that year, then the reinvestment buys shares at the new, higher price. Finally the per-share dividend is grown for next year.
repeat each year: price = price × (1 + price growth) dividend = shares × dividend per share shares = shares + (dividend ÷ price) ← only if reinvesting dividend per share = dividend per share × (1 + dividend growth) dividend per share (year 1) = starting price × yield ending value = shares × price yield on cost = dividend per share ÷ original price paid
- shares
- Shares held, growing fractionally as dividends buy more — 100 at the start, 221.50 after 20 years on the defaults — real brokerage DRIPs do buy fractional shares
- price
- Share price, compounding at the price-growth rate — $50 rising to $109.56 over 20 years at 4%
- yield
- Current dividend yield — annual dividend ÷ share price — 3.5% default; sets only the year-1 dividend, after which dividend growth takes over
- dividend per share
- The annual payment per share, growing each year — $1.75 in year 1, $5.29 by year 20 at 6% growth
- dividend growth
- How fast the company raises its payout each year — 6% default; US dividend aristocrats are defined by having raised for 25+ consecutive years, which is rarer than the assumption suggests
- price growth
- Annual share price appreciation — 4% default — deliberately below dividend growth, which is what makes yield on cost climb
Notice that price growth cuts both ways in a DRIP, which is unusual. A rising price makes your existing shares worth more but makes each reinvestment buy fewer shares. That's why the defaults set price growth (4%) below dividend growth (6%): a payout growing faster than the price is what drives yield on cost from 3.5% to 10.59% over twenty years. If price growth exceeded dividend growth, the current yield would fall and each dividend would buy progressively less.
The reinvestment happens at the grown price — the loop raises the price before buying — so this model never lets you buy at last year's cheaper price. It also pays dividends annually, while most US companies pay quarterly. Quarterly reinvestment would compound four times a year instead of once and produce a slightly higher figure, so the projection here is marginally conservative. For the same compounding without the dividend framing, the compound interest calculator uses a general engine.
Worked examples
Example: 100 shares at $50 with dividends reinvested for 20 years
The calculator's defaults — a $5,000 position yielding 3.5%, with the dividend growing 6% a year and the price growing 4% a year.
| Starting position100 shares × $50 | $5,000 |
| Year 1 dividend per share$50 × 3.5% | $1.75 |
| Year 1 dividend totalbought 3.37 shares at $52 | $175.00 |
| Year 20 dividend per share$1.75 grown at 6% for 19 years | $5.29 |
| Final share count+121.50 shares, all bought by dividends | 221.50 |
| Final share price$50 grown at 4% for 20 years | $109.56 |
| Total dividends receivedmore than double the original position | $10,119 |
| Ending value221.50 × $109.56 | $24,267 |
$5,000 became $24,267 with no new money. Only $5,956 of that came from the share price — $50 to $109.56 on the original 100 shares. The other $13,311 came from shares the dividends bought and the dividends those shares then paid. That's the DRIP: the dividend stream bought more dividend stream, 121.5 shares' worth.
Example: the same position with dividends taken as cash
Switch the toggle to 'Take as cash'. The share count stays at 100 forever and the dividends land in your account instead. Read this one carefully — the calculator's headline number does not tell the whole story.
| Final share countunchanged — nothing reinvested | 100.00 |
| Ending position value100 × $109.56 — what the tool shows | $10,956 |
| Dividends taken as cashreceived but NOT in the headline | $6,437 |
| Honest cash-mode total$10,956 + $6,437, assuming the cash just sat there | $17,393 |
| DRIP ending value | $24,267 |
| Real DRIP advantage$24,267 − $17,393 | $6,874 |
| What the page implies$24,267 − $10,956 — double-counts the missing cash | $13,311 |
The DRIP is genuinely ahead, by $6,874 — but not by the $13,311 the two headline cards suggest. The 'Ending value' card in cash mode reports the stock position only and silently drops the $6,437 of dividends the investor was actually paid. Compare $24,267 against $17,393 and you're comparing two people with the same money; compare it against $10,956 and you're comparing an investor to someone who threw their dividends away. Note that $17,393 is still generous to the cash-taker in one direction: it assumes the cash earned nothing at all for twenty years.
Frequently asked questions
Are reinvested dividends taxed?
Yes, in a taxable account, and it catches people every year. A dividend is income when it's paid, regardless of what happens next — reinvesting is treated as receiving the cash and choosing to buy stock with it. It lands on your 1099-DIV and you owe tax that year, though no money reached your bank account.
The rate depends on the dividend. Qualified dividends — broadly, from US corporations or qualifying foreign ones, on shares held long enough — get long-term capital gains rates of 0%, 15% or 20%; for 2026 the 15% rate starts above $49,450 of taxable income for single filers and $98,900 for married filing jointly. Non-qualified dividends, including most REIT distributions, are taxed as ordinary income. Above $200,000 (single) or $250,000 (married filing jointly), add the 3.8% net investment income tax. Inside an IRA, 401(k) or Roth, none of this happens.
Should I reinvest dividends or take the cash?
That's a decision this page won't make for you, but the mechanics are clear. Reinvesting compounds the position: on the defaults it's worth $24,267 against $17,393 for taking the cash and letting it sit — a $6,874 edge over twenty years.
The trade-offs run the other way for three groups. Retirees using dividends as income can't reinvest them. Investors whose position is already concentrated add to that concentration with every reinvestment — a DRIP is a standing order to buy more of the one thing you already own most of. And in a taxable account each reinvestment creates a new tax lot with its own basis and holding period, which gets tedious at 80 lots and matters when you sell.
What is yield on cost and why does it go up?
Yield on cost is the current dividend measured against what you originally paid, rather than against today's price. On the defaults you paid $50 a share; by year 20 the dividend is $5.29, so your yield on cost is 10.59% — while a new buyer at $109.56 sees a current yield of 4.83% on the same dividend.
It rises because the dividend grows (6%) faster than the price (4%). Nothing about the company got better for you specifically — you simply locked in a purchase price two decades ago and the payout kept climbing away from it. It's a useful measure of how a long-held position has treated you and a poor one for deciding anything today: the market doesn't care what you paid, and a 10.59% yield on cost isn't a 10.59% return on capital you could redeploy elsewhere.
How much of the stock market's return comes from dividends?
About 40% of the S&P 500's total return since 1926 came from reinvested dividends rather than price appreciation. It's the single biggest reason price charts understate long-run stock returns — the index level you see on the news is a price index, not a total-return one.
This page's defaults show the same effect in miniature. Of the $24,267 ending value, only $10,956 is the original 100 shares at the grown price. The remaining $13,311 exists because dividends were reinvested and then paid dividends themselves. Price growth of 4% a year did less than half the work.
Is a 6% dividend growth rate realistic?
It's optimistic as a twenty-year assumption for a single stock, and the calculator applies it with perfect consistency — no cuts, no freezes, no bankruptcies.
For scale: the S&P 500 Dividend Aristocrats index requires 25+ consecutive years of increases, and only a few dozen of the 500 qualify at any time. Dividends were cut across large parts of the market in 2008-09 and again in 2020, including by companies with long streaks. A 6% growth rate sustained for 20 years describes a survivor, and you're choosing it with hindsight. Dialling it to 3-4% is a materially different projection, and the slider is there for that reason.
Where this DRIP model parts company with a real brokerage account
One stock, three constant growth rates, no tax. The first item below is a flaw in the tool itself, not just a simplification.
- Cash mode drops the cash — With reinvestment off, 'Ending value' shows the stock position only ($10,956) and never adds back the $6,437 of dividends you were paid. The comparison against the DRIP's $24,267 therefore overstates reinvestment's advantage by roughly double — $13,311 shown against a real $6,874. Add the 'Total dividends' card to the cash-mode position yourself.
- No tax on dividends — In a taxable account, qualified dividends are taxed at 0%, 15% or 20% the year they're paid, so only the after-tax amount can be reinvested. Applying 15% to the defaults ends at $21,582 rather than $24,267 — a $2,685 drag, and 24.5 fewer shares. The untaxed projection is the IRA or 401(k) case.
- Annual dividends, not quarterly — Most US companies pay quarterly. Reinvesting once a year compounds four times less often, making this model slightly conservative — but it also lands the year-1 dividend of $175 in one lump that the real schedule would have spread across four purchases at four prices.
- Perfectly steady growth, and one stock — Price rises 4% and the dividend rises 6% every year for twenty years — no recession, no cut, no re-rating. A model that never cuts the dividend can't show the risk that actually ends DRIP strategies. It also has no view on whether 221.5 shares of one company is a sensible thing to own, and reinvestment mechanically increases that concentration every year.
- ·Standard dividend-reinvestment model
Rates, brackets and limits here are checked against primary sources. If a number still looks off, email support@realmoneyiq.com and we'll review and fix it.
RealMoneyIQ provides free educational calculators, not financial, tax, investment or legal advice. Results are estimates based on the assumptions you enter and publicly published rates; your actual outcome will differ. Always confirm decisions with a licensed professional who knows your full situation.