Dividend Reinvestment (DRIP) Calculator
Projected Portfolio Value
Total Ending Balance:
$0.00
Total Dividends Earned:
$0.00
Annual Income at End:
$0.00
Total Principal Invested:
$0.00
Understanding the Power of Dividend Reinvestment (DRIP)
A Dividend Reinvestment Plan, commonly known as a DRIP, is a strategy where dividends paid out by a company are automatically used to purchase more shares of that company's stock, rather than being taken as cash. This calculator helps you visualize the exponential growth potential of compounding dividends alongside share price appreciation.
How the DRIP Calculation Works
Our calculator uses a multi-factor growth model. Every year, your portfolio grows in four distinct ways:
- Share Price Appreciation: The underlying value of the shares you own increases based on market performance.
- Cash Dividends: The company pays you a percentage of the share price as a reward for holding the stock.
- Reinvestment: Those cash dividends are immediately converted into more shares, which will then pay their own dividends next year.
- Annual Additions: New capital you contribute manually to accelerate the snowball effect.
Realistic DRIP Example:
Imagine you start with $10,000 in a high-quality dividend growth stock. If the stock has a 4% dividend yield and the company increases its dividend by 5% annually, your income doesn't just grow linearly—it grows quadratically. Over 20 years, with a $100 monthly addition, a simple $10,000 investment can grow into nearly $100,000, with the annual dividend income alone exceeding your original monthly contributions.
Imagine you start with $10,000 in a high-quality dividend growth stock. If the stock has a 4% dividend yield and the company increases its dividend by 5% annually, your income doesn't just grow linearly—it grows quadratically. Over 20 years, with a $100 monthly addition, a simple $10,000 investment can grow into nearly $100,000, with the annual dividend income alone exceeding your original monthly contributions.
Key Benefits of Using a DRIP Strategy
1. Dollar-Cost Averaging: Because you are buying shares regularly regardless of the price, you naturally buy more shares when prices are low and fewer when prices are high.
2. Compound Interest on Steroids: You aren't just earning interest on your principal; you are earning dividends on your dividends.
3. Reduced Emotional Trading: Automation helps investors stick to a long-term plan without trying to "time the market."