How to use this calculator
- Starting balance: what the portfolio is worth today.
- Dividend yield: the yearly dividends it pays now, as a percentage of that balance.
- Dividend growth: how much you expect the dividends themselves to rise each year.
- Price growth: how much you expect the value of the holdings to rise each year, apart from dividends.
- Years and monthly contribution: how long you invest and how much you add each month.
- Reinvest dividends: Yes puts every payment back in; No takes it as cash.
- Dividends paid: how often payments arrive, which is also how often they compound.
The formula
The calculator works month by month. Each month:
Balance = Balance + Monthly contribution
Balance = Balance × (1 + Price growth)1/12
On a payment month:
Dividend = Units × Yearly dividend per unit ÷ Payments per year
If reinvesting: Units = Units + Dividend ÷ Unit price
Behind the scenes the portfolio is counted in “units” that start at $1 each. That keeps the dividend and the price separate, the same way shares and a share price do. Three rules decide how things grow:
- The unit price rises a little every month, so that over a year it grows by exactly the price growth you entered.
- The dividend per unit goes up once a year, at the start of each new year, the way most companies raise their payouts.
- Contributions go in at the start of each month; dividends arrive at the end of each payment month.
When dividend growth and price growth differ, the yield drifts. With dividends growing 6% and prices 5%, each dollar you own pays a slightly larger share of its value every year. The “yearly income rate” column in the table shows the dividends the portfolio would pay over the next twelve months at that point.
Worked example
The starting numbers: $25,000 yielding 3.5%, dividends growing 6% a year, prices growing 5%, plus $500 a month for 25 years, with quarterly dividends reinvested.
- Today the portfolio pays 3.5% × $25,000 = $875.00 a year, or about a quarter of that each quarter.
- In year 1 you add $6,000, collect $1,016.58 in dividends, and end at $33,445.81.
- After 25 years you have contributed $175,000.00, counting the starting balance.
- The balance reaches $767,181.44, so $592,181.44 of it is growth and reinvested dividends.
- Dividends earned over the whole period add up to $268,118.11, and the final year alone pays $31,178.75.
By the end, the portfolio pays dividends at a rate of $32,105.13 a year, more than the $6,000 you were adding each year. That is the point where the dividends do more of the work than your contributions.
Dollars instead of shares
The DRIP Calculator follows one stock: a share price, a dividend per share and a share count. This calculator skips the shares. It suits a whole portfolio or a fund where you know the balance and the yield, which is how most brokerage statements show it. Given the same rates, both calculators follow the same rules, so their results agree.
Contributions vs growth
The gold line in the chart is the money you put in. The space between it and the green line is everything else: price growth plus reinvested dividends. Early on the two lines sit close together, and most of your balance is your own money. Over decades the gap opens up, because growth compounds on a larger base each year while contributions only add a fixed amount.
Tip: run the same numbers with “Reinvest dividends” set to No. The difference in the ending balance is the value of compounding your dividends, separate from the price growth you’d get either way.
What this calculator leaves out
It doesn’t take out taxes or fees. In a regular brokerage account, dividends are taxed in the year they are paid even when you reinvest them; the Dividend Tax Calculator estimates that bill. It also assumes smooth, steady growth, which real markets never deliver. To see how long it takes to reach a particular income, use the Dividend Income Goal Calculator.