Dividend Reinvestment (DRIP) Calculator
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Total Principal Invested:
$0.00
Total Dividends Earned:
$0.00
Capital Appreciation:
$0.00
Ending Portfolio Value:
$0.00
Final Annual Dividend Income:
$0.00
What is a Dividend Reinvestment Plan (DRIP)?
A Dividend Reinvestment Plan, or DRIP, is an investment strategy where the cash dividends paid by a company are automatically used to purchase additional shares of that same company. Instead of receiving a check or cash in your brokerage account, your earnings are put back to work immediately.
The Power of Compounding Dividends
The primary benefit of a DRIP is the "compounding effect." When you reinvest dividends, you own more shares. Those additional shares then pay their own dividends, which are used to buy even more shares. Over a long period, this cycle creates an exponential growth curve in your portfolio value.
How to Use the DRIP Calculator
- Initial Investment: The amount of money you are starting with today.
- Annual Dividend Yield: The percentage of the stock price the company pays out in dividends per year.
- Annual Stock Appreciation: The expected yearly percentage increase in the stock's price.
- Years to Grow: Your investment time horizon.
- Monthly Contribution: Any additional money you plan to add to the position every month.
Real-World Example Calculation
Imagine you start with $10,000 in a stock that has a 4% dividend yield and grows at 5% per year. If you contribute $500 per month and reinvest all dividends over 20 years, your ending balance wouldn't just be the sum of your contributions. Because of the compounding dividends and share price appreciation, your portfolio could potentially grow to over $400,000, with a significant portion of that total coming purely from reinvested dividends.