Dividend Reinvestment Plan (DRIP) Calculator
Project your investment growth by reinvesting dividends over time.
The annual percentage of return paid in dividends.
How much the company increases its payout yearly.
0% for IRA/401k, typically 15% or 20% for taxable.
Projected Results
Final Portfolio Value
$0.00
Total Dividends Reinvested
$0.00
Total Shares Owned
Total Return on Investment
0%
Projected Final Stock Price: $0.00
What is a Dividend Reinvestment Plan (DRIP)?
A Dividend Reinvestment Plan, commonly known as a DRIP, is a powerful investment strategy used by long-term investors to compound their wealth. Instead of receiving cash payments when a company pays out dividends, a DRIP automatically uses that money to purchase additional shares (or fractional shares) of the underlying stock.
Why Use this DRIP Calculator?
Calculating the future value of a dividend-paying stock can be complex because there are multiple moving parts. This calculator specifically handles:
- Reinvestment Logic: It calculates how many new shares you buy every year using your dividend income.
- Dual Growth: It accounts for both the appreciation of the stock price and the growth of the dividend payout itself (Dividend Growth Rate).
- Tax Drag: In a taxable brokerage account, you must pay taxes on dividends before reinvesting them. This calculator deducts that tax to give you a realistic "Net" result.
Understanding the Key Inputs
To get the most accurate projection from the calculator above, it helps to understand the terminology:
- Dividend Yield: This is the ratio of a company's annual dividend compared to its share price. For example, if a stock trades at $100 and pays $3 a year, the yield is 3%.
- Dividend Growth Rate: "Dividend Aristocrats" are known for raising their payout every year. If a company raises its dividend by 5% annually, your income grows faster than inflation.
- Tax Rate: If you are investing in a Roth IRA, set this to 0%. If you are in a standard brokerage account, long-term capital gains tax rates (usually 15% or 20%) often apply to qualified dividends.
The Power of Compounding
The magic of a DRIP lies in compounding. When you reinvest dividends, you own more shares. More shares mean you receive a larger dividend payment next time. That larger payment buys even more shares. Over a period of 20 or 30 years, this cycle can result in exponential growth, often termed the "snowball effect."