A Dividend Reinvestment Plan (DRIP) is a powerful wealth-building strategy where the cash dividends paid by a company are automatically used to purchase more shares of that stock. Instead of taking the cash as income, you use it to increase your ownership stake.
This creates a compounding effect. Not only do you earn dividends on your initial investment, but you also start earning dividends on the dividends you've reinvested. Over long horizons, this can significantly outperform a strategy where dividends are spent.
Realistic Example:
If you start with $10,000 in a quality dividend-paying ETF (like SCHD or VIG) with a 3.5% yield and add $500 monthly, assuming a 7% annual share price growth:
After 10 years, you could see a balance of over $110,000.
Without reinvesting dividends, your balance would be significantly lower as you'd miss out on the compounding growth of those extra shares.
Why Stock Appreciation Matters
While dividends provide a steady income stream, stock appreciation represents the increase in the share price itself. Our calculator combines both the "Yield" (the cash return) and the "Appreciation" (the growth return) to give you a "Total Return" projection. This is the most accurate way to forecast your portfolio's future value.
Key Benefits of Using a DRIP
Dollar-Cost Averaging: You buy shares consistently regardless of price, lowering your average cost per share over time.
No Commissions: Many brokerage DRIP programs allow you to reinvest with zero transaction fees.
Fractional Shares: DRIPs often allow you to own fractions of a share, ensuring every cent of your dividend is put to work immediately.
function calculateDRIP() {
var initial = parseFloat(document.getElementById('initialBalance').value);
var monthlyAdd = parseFloat(document.getElementById('monthlyContribution').value);
var yieldRate = parseFloat(document.getElementById('annualYield').value) / 100;
var growthRate = parseFloat(document.getElementById('annualAppreciation').value) / 100;
var years = parseInt(document.getElementById('years').value);
var freq = parseInt(document.getElementById('dividendFreq').value);
if (isNaN(initial) || isNaN(monthlyAdd) || isNaN(yieldRate) || isNaN(growthRate) || isNaN(years)) {
alert("Please enter valid numeric values.");
return;
}
var totalMonths = years * 12;
var currentBalance = initial;
var totalInvested = initial;
var totalDividends = 0;
var monthlyGrowthRate = Math.pow(1 + growthRate, 1/12) – 1;
var divInterval = 12 / freq;
for (var m = 1; m <= totalMonths; m++) {
// 1. Add monthly contribution
currentBalance += monthlyAdd;
totalInvested += monthlyAdd;
// 2. Apply stock price appreciation
currentBalance *= (1 + monthlyGrowthRate);
// 3. Apply dividends if it's the correct month
if (m % divInterval === 0) {
var dividendAmount = currentBalance * (yieldRate / freq);
totalDividends += dividendAmount;
currentBalance += dividendAmount;
}
}
var totalGains = currentBalance – totalInvested – totalDividends;
document.getElementById('totalInvested').innerText = formatCurrency(totalInvested);
document.getElementById('totalDividends').innerText = formatCurrency(totalDividends);
document.getElementById('totalGains').innerText = formatCurrency(totalGains);
document.getElementById('finalBalance').innerText = formatCurrency(currentBalance);
document.getElementById('resultContainer').style.display = 'block';
}
function formatCurrency(num) {
return '$' + num.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
}