Dividend Reinvestment (DRIP) Calculator
Visualize the compounding power of a Dividend Reinvestment Plan. Compare reinvesting dividends against taking payouts in cash, and project share growth over time.
Compounding Schedule
| Year | Share Price | Shares Owned | Portfolio Value | Year's Dividends | Cumulative Dividends | Cumulative Contributions |
|---|---|---|---|---|---|---|
| 1 | $53.50 | 254.06 | $13,592.04 | $405.98 | $405.98 | $12,400.00 |
| 2 | $57.24 | 306.68 | $17,555.78 | $523.22 | $929.20 | $14,800.00 |
| 3 | $61.25 | 357.96 | $21,925.57 | $648.57 | $1,577.77 | $17,200.00 |
| 4 | $65.54 | 407.98 | $26,738.71 | $782.58 | $2,360.36 | $19,600.00 |
| 5 | $70.13 | 456.82 | $32,035.74 | $925.86 | $3,286.21 | $22,000.00 |
| 6 | $75.04 | 504.56 | $37,860.68 | $1,079.03 | $4,365.24 | $24,400.00 |
| 7 | $80.29 | 551.27 | $44,261.33 | $1,242.77 | $5,608.01 | $26,800.00 |
| 8 | $85.91 | 597.02 | $51,289.57 | $1,417.80 | $7,025.81 | $29,200.00 |
| 9 | $91.92 | 641.86 | $59,001.67 | $1,604.86 | $8,630.67 | $31,600.00 |
| 10 | $98.36 | 685.85 | $67,458.69 | $1,804.78 | $10,435.45 | $34,000.00 |
The Compounding Power of DRIP
By reinvesting dividends, you continuously buy more shares of the stock, which in turn pays you even more dividends. This loop creates exponential growth, particularly over longer horizons (10 to 30 years).
Important Parameters
- Dividend Yield: The ratio of annual dividends paid per share relative to the stock price.
- Dividend Growth: The annual percentage increase in the dividend payment amount, reflecting corporate earnings growth.
- Stock Appreciation: The underlying capital growth of the stock price, contributing to portfolio net worth.
Frequently asked questions
What is a Dividend Reinvestment Plan (DRIP)?
A DRIP is a program that allows investors to automatically reinvest cash dividends received from a stock back into purchasing additional shares (or fractional shares) of the same company, compounding the investment over time without paying standard brokerage commissions.
Why should I reinvest dividends?
Reinvesting dividends is one of the most powerful compounding tools in investing. By using dividends to buy more shares, you increase the size of your portfolio, which in turn generates larger future dividends, leading to exponential growth in the long run.
How does dividend growth affect returns?
Companies that regularly increase their dividends (dividend growers) compound your return in two ways: the stock price itself appreciates, and the cash paid per share increases. This increases your yield-on-cost and accelerates share acquisition.