Dividend Reinvestment (DRIP) Calculator
Estimate the growth of your portfolio using the power of compounding dividends.
Projected Portfolio Performance
Ending Balance:
Total Dividends Received:
Annual Dividend Income at End:
Total Capital Contributed:
Yield on Cost:
What is a Dividend Reinvestment Plan (DRIP)?
A Dividend Reinvestment Plan, commonly known as a DRIP, is an investment strategy where the cash dividends paid by a company are automatically used to purchase additional shares of that company's stock. Instead of receiving a check or cash in your brokerage account, the money is put back to work immediately.
Over long periods, DRIPs are one of the most powerful tools for wealth creation because they harness the power of compounding. By buying more shares, you increase the size of your next dividend payment, which in turn buys even more shares.
How This Calculator Works
This calculator simulates the growth of a stock or ETF portfolio by accounting for three distinct growth engines:
- Stock Price Appreciation: The natural increase in the value of the shares you own.
- Dividend Yield: The cash return paid out by the company, which is reinvested to buy more shares.
- Dividend Growth: Many "Dividend Aristocrats" increase their dividend payouts every year, accelerating your cash flow.
Example Calculation: The Power of 20 Years
Imagine you start with $10,000 and contribute $500 per month. If the stock has a 3.5% yield, a 5% annual dividend growth rate, and the stock price grows by 6% annually, let's look at the 20-year horizon:
- Initial Capital: $10,000
- Total Contributions: $120,000 ($500 x 240 months)
- Result: After 20 years, your portfolio would likely exceed $450,000, with a massive portion of that total coming from reinvested dividends and the growth of those dividends over time.
Why Yield on Cost Matters
One of the metrics this calculator provides is Yield on Cost (YOC). This represents the annual dividend income you receive divided by the total amount of money you actually invested out of pocket. For long-term dividend investors, it is common to see a YOC of 10%, 20%, or even 50% after several decades, meaning your original investment is generating massive cash flow relative to its starting size.