Dividend Reinvestment (DRIP) Calculator

How the Year-by-Year Simulation Is Built

Each simulated year runs the same four steps: the dividend per share grows by your entered growth rate; the share price grows by its own separate growth rate; the total cash dividend for that year (shares held × dividend per share) is calculated; and that cash is used to buy new shares at that year's new price. Those new shares are added to your holding, so next year's dividend is paid on a larger share count. The comparison scenario runs the same price growth but keeps your share count fixed at the original number, paying the dividend out as cash that simply accumulates without being reinvested or growing further.

A Small Worked Example

With the calculator's defaults — 100 shares at $50, a $2 annual dividend growing 5% a year, and the share price growing 7% a year — year one looks like this: the dividend per share grows to $2.10, the price grows to $53.50, the total dividend paid is 100 × $2.10 = $210, and that $210 buys $210 ÷ $53.50 ≈ 3.93 new shares, bringing your total to roughly 103.93 shares heading into year two. Run the full simulation above to see how this compounds across your chosen number of years.

Reinvesting vs. Pocketing the Cash

The gap between the two lines in the chart above is the entire point of a DRIP. Reinvesting doesn't change the dividend or the price growth rate — both scenarios use identical assumptions for those. The only difference is what happens to the cash the dividend generates each year. Because reinvested dividends buy shares that then earn their own dividends, the reinvested path grows faster the longer the time horizon runs, which is why the advantage tends to widen most noticeably in the later years of a long simulation rather than the early ones.

Questions Worth Asking Before You Rely on This

Q: Do I still owe tax on dividends I never actually received as cash?
A: In most tax jurisdictions, yes. Reinvested dividends are typically still treated as taxable income in the year they are paid, even though the cash went straight into buying more shares instead of into your pocket. This calculator does not model taxes — check your own jurisdiction's rules.

Q: Is it realistic to assume the dividend grows at a constant rate every year?
A: No, real companies raise, freeze, or cut dividends unevenly depending on business performance. A constant growth rate is a simplifying assumption used to project a smooth trend line, not a guarantee of what any specific company will do.

Q: What if the share price falls during a year in the simulation?
A: You can enter a negative price growth rate to model that. A falling price actually means each dollar of dividend buys more new shares that year, which is one reason DRIPs can work particularly well for accumulating shares during a prolonged downturn.