Dividend Reinvestment (DRIP) Calculator

Enter what you invest, the share price, the dividend yield and how often it is paid, how fast the dividend and the share price grow, how many years you hold, any monthly contribution and the tax on dividends. The calculator reinvests every payment and returns the value, the shares and the yearly income you end with, next to what you would have if you took every dividend as cash. With the defaults, 10,000 in a stock priced at 50 and yielding 3%, paid quarterly, with the dividend and the price both growing 5% a year, twenty years of reinvesting ends at 47,385.43 against 36,452.76 taken as cash.

How each dividend is reinvested

The calculator steps through the holding one month at a time. The share price grows smoothly at the price growth rate, so after m months it stands at P₀ × (1 + g)^{m ÷ 12}. The dividend per share is the yield applied to the starting price, raised by the dividend growth rate on each anniversary and paid in equal parts at the end of every 12, 6, 3 or 1 months. On each payment date every share you hold earns the payment, the tax is taken off, and the rest buys more shares at that day's price:

N_after = N_before + N_before × d × (1 − t) ÷ P

Here N is the number of shares, d the dividend per share in that payment, t the tax rate and P the share price on the payment date. Fractions of a share are kept, and the dividend figures in the results are before tax. The value at any point is the shares times the price, and the cash route keeps the starting shares but banks every dividend, after tax, as cash that earns nothing.

A monthly contribution buys shares at the end of each month, after any dividend paid that month. Between payments the price it pays includes the part of the next dividend already earned, and that part falls away when the dividend is paid, so money added just before a payment pays for the dividend it collects rather than getting it free. Real prices behave much the same way on average: a 1994 Federal Reserve Bank of Minneapolis working paper by John Boyd and Ravi Jagannathan found the price drop on the ex-dividend day not significantly different from the dividend, and called a one-for-one drop an excellent rule of thumb.

Working the default example through

At the defaults you buy 200 shares at 50. The first year's dividend is 3% of 50, or 1.50 a share, paid as 0.375 each quarter. Three months in, the price has grown to 50 × 1.05^0.25 = 50.6136, and the first payment of 200 × 0.375 = 75 buys 75 ÷ 50.6136 = 1.4818 more shares. Three more payments follow, each on a slightly larger holding, so the first year pays 303.32 in dividends and ends with 205.88 shares worth 10,808.92. In the second year the dividend rises 5% to 1.575 a share, and the cycle repeats.

After 20 years and 80 payments you hold 357.1814 shares, shown as 357.18, and the price has reached 50 × 1.05²⁰ = 132.6649, so the holding is worth 357.1814 × 132.6649 = 47,385.43. The last year alone pays 1,329.75 in dividends, and the twenty years together pay 14,018.56. Taking the cash instead leaves the original 200 shares, worth 200 × 132.6649 = 26,532.98, plus just under 9,920 of dividends collected along the way, for 36,452.76 in all. Reinvesting comes out 10,932.67 ahead, and because the dividend and the price grow at the same rate the yield stays at 3% throughout, which is what the end yield reports.

Where dividend reinvestment came from

The arithmetic was measured before it was sold as a plan. At the beginning of 1964 James Lorie and Lawrence Fisher published the first detailed and comprehensive study of rates of return on all common stocks listed on the New York Stock Exchange, built on the work of the Center for Research in Security Prices that Lorie had founded at the University of Chicago's business school in 1960. They recorded monthly closing prices for about 1,700 stocks from January 1926, along with 39 kinds of distributions to shareholders, warehouse receipts for whiskey among them, and reported returns with and without reinvestment of dividends. Equal amounts put into every listed company, with the dividends reinvested and no tax to pay, earned 9 percent a year compounded annually over 1926–1960. Bought at the height of the 1929 bull market and held to the end of 1960, the same portfolio still earned 7.7 percent.

Companies came to the idea later. In April 1982 the Christian Science Monitor reported that mutual fund shareholders had long been used to reinvesting dividends, and that utilities were the next industry to offer it, led by the Allegheny Power System in 1968, with railroads, steel, chemical, oil and banking companies following. In 1973 only about 150 companies listed on the New York and American stock exchanges offered plans; by 1982, by the count of Donald Cassidy of Arthur D. Little Decision Resources, more than 750 did. A growing number sold the new shares at a discount, 5 percent below the market price in the paper's account, and the Economic Recovery Tax Act added a tax break: from 1982 to 1985, up to $750 a year, or $1,500 on a joint return, of dividends reinvested in new stock of qualifying utilities was exempt from federal income tax. Cassidy's own holding showed the effect. The 100 shares of a utility he bought in 1975 for his children's education had become more than 200 by 1982, without his buying a single share.

The default example at other growth rates

Moving the dividend and the price together keeps the yield at 3%, and leaves the other defaults as they are:

The gain grows with the growth rate and turns negative once both shrink by more than about 3.0% a year, almost exactly the yield. Below that point each reinvested dividend buys shares that lose value faster than they pay out, while cash set aside keeps its face value. The end yield is the other figure worth watching. When the dividend grows faster than the price, the yield on the price climbs every year: with the dividend growing 5% and the price falling 10%, the end yield reaches 65.47% and the reinvested holding 56,970.59, against 11,135.55 for the cash route. No real share keeps that up for twenty years, so keep the two rates close unless you have a reason not to.

Tax on reinvested dividends

Reinvesting does not put off the tax. IRS Publication 550 for 2025 says that if you use your dividends to buy more stock at a price equal to its fair market value, you must still report the dividends as income. Where a plan sells shares below fair market value, the fair market value of the extra stock on the payment date counts as dividend income, and any service charge taken out of the dividend is reported too. Qualified dividends carry the same 0%, 15% or 20% maximum rate as net capital gain. In the UK, GOV.UK sets a £500 dividend allowance and, from 6 April 2026 to 5 April 2027, rates of 10.75%, 35.75% and 39.35% on dividends above it, with no tax on dividends from shares in an ISA. The calculator takes the tax out of each payment before reinvesting the rest, as a withholding tax would; in the US the bill comes due when you file instead, so the money to pay it has to come from somewhere. At a 15% rate the default example ends at 43,449.25 instead of 47,385.43.

Assumptions

The rates stay fixed for the whole period, while real dividends are raised and cut irregularly and prices move every day. The dividend starts as a percentage of the starting price and then grows on its own schedule, so it never adjusts to the price path. There are no fees and no plan discounts, and fractional shares are kept rather than paid out as cash. Dividends taken as cash sit idle, so the comparison measures reinvesting against doing nothing with the money, not against investing it somewhere else, and a negative gain means taking the cash would have left you with more. To see what the final figure is worth in today's money, run it through the inflation calculator.

Projections assume constant growth rates and are illustrations, not financial advice or a guarantee of returns. See the site disclaimer.