A Dividend Reinvestment Plan (DRIP) is a powerful wealth-building 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, you use that income to increase your position, which in turn leads to even larger dividend payments in the future.
How This Calculator Works
Our DRIP calculator takes several factors into account to provide a realistic projection of your portfolio's growth:
Initial Investment: The starting amount you have in the stock or fund today.
Monthly Contributions: Regular additions to your principal, simulating a "dollar-cost averaging" approach.
Annual Dividend Yield: The percentage of the stock price paid out in dividends each year.
Stock Appreciation: The estimated annual increase in the share price itself.
Compounding Frequency: How often the company pays dividends (Monthly, Quarterly, or Annually).
Example: The Power of Time
Imagine you start with $10,000 in a stock yielding 4% with an expected annual growth of 5%. If you contribute $500 per month and reinvest all dividends, after 20 years, your portfolio wouldn't just be the sum of your contributions; it would have ballooned significantly due to the "interest on interest" effect. By the end of the period, your annual passive income from dividends alone could exceed your original monthly contributions.
Why Reinvest Dividends?
The primary benefit of DRIP is compound growth. When you reinvest, you are buying more shares. More shares mean more dividends next quarter. More dividends mean you buy even more shares next time. Over a decade or more, this creates a "snowball effect" that can turn a modest portfolio into a significant retirement fund.
function calculateDRIP() {
var p = parseFloat(document.getElementById('initialBalance').value);
var yieldPercent = parseFloat(document.getElementById('divYield').value) / 100;
var monthlyAdd = parseFloat(document.getElementById('monthlyAdd').value);
var appreciationPercent = parseFloat(document.getElementById('stockGrowth').value) / 100;
var years = parseInt(document.getElementById('years').value);
var freq = parseInt(document.getElementById('divFreq').value);
if (isNaN(p) || isNaN(yieldPercent) || isNaN(monthlyAdd) || isNaN(appreciationPercent) || isNaN(years)) {
alert("Please enter valid numbers in all fields.");
return;
}
var totalMonths = years * 12;
var currentBalance = p;
var totalInvested = p;
var totalDividends = 0;
// Monthly rates
var monthlyAppreciation = appreciationPercent / 12;
var yieldPerPeriod = yieldPercent / freq;
var monthsPerPeriod = 12 / freq;
for (var m = 1; m <= totalMonths; m++) {
// 1. Capital Appreciation (Monthly)
currentBalance *= (1 + monthlyAppreciation);
// 2. Monthly Contribution
currentBalance += monthlyAdd;
totalInvested += monthlyAdd;
// 3. Dividend Payout (if it's the right month)
if (m % monthsPerPeriod === 0) {
var dividendEarned = currentBalance * yieldPerPeriod;
currentBalance += dividendEarned;
totalDividends += dividendEarned;
}
}
var finalAnnualPassive = currentBalance * yieldPercent;
// Display Results
document.getElementById('drip-result-area').style.display = 'block';
document.getElementById('finalBalanceDisplay').innerText = '$' + currentBalance.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('totalContribDisplay').innerText = '$' + totalInvested.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('totalDivDisplay').innerText = '$' + totalDividends.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('annualPassiveDisplay').innerText = '$' + finalAnnualPassive.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
}