Dividend Reinvestment (DRIP) Calculator
How a Dividend Reinvestment Plan (DRIP) Works
A Dividend Reinvestment Plan, or DRIP, is a powerful financial strategy where the cash dividends paid out by a company or fund are automatically used to purchase more shares of that same investment. Instead of receiving a check or cash in your brokerage account, your capital is immediately put back to work.
The Power of Compounding Dividends
The real magic of DRIP occurs through "compounding." When you reinvest dividends, you own more shares. Those additional shares then produce their own dividends in the next cycle, which buy even more shares. Over 10, 20, or 30 years, this snowball effect can account for a massive percentage of total stock market returns.
Example: Realistic DRIP Growth
If you start with $10,000 and contribute $500 per month into a stock with a 4% yield and 5% annual price growth:
- After 10 Years: Your portfolio would grow to approximately $108,000, generating over $4,000 in annual passive income.
- After 20 Years: The balance swells to roughly $315,000, with your annual dividends reaching nearly $12,000.
Why Use This Calculator?
Our DRIP calculator goes beyond simple interest. It accounts for monthly contributions, annual stock price appreciation, and even the dividend tax drag, giving you a realistic projection of your future passive income stream and total portfolio value.