How to use this calculator
- Initial investment and share price set how many shares you start with.
- Dividend is the yearly amount per share today, in dollars or as a yield.
- Payment frequency is how often the dividend arrives and gets reinvested.
- Dividend growth is the yearly raise you expect. Many established payers have raised by 4% to 8% a year, but nothing guarantees it.
- Share price growth is how fast you expect the price to rise. It sets what each reinvested dividend can buy.
- Regular contribution is new money you add, every month or once a year.
- Reinvest dividends switches between a DRIP and taking the cash.
- Tax rate takes tax out of each dividend before it’s reinvested, as happens in a taxable account if you pay the tax from the dividend itself.
The formula
The calculator steps through every month. On each payment date:
Dividend = Shares × (Annual dividend per share ÷ Payments per year)
After tax = Dividend × (1 − Tax rate)
New shares = After-tax dividend ÷ Share price that day
Shares = Shares + New shares
Two rules decide how things grow:
- The share price rises a little every month, so that over a full year it grows by exactly the rate you entered. At 4% a year that’s about 0.33% a month.
- The dividend per share goes up once a year, at the start of each new year, because that is how most companies raise their payouts.
Monthly contributions buy shares at the start of each month. Yearly contributions buy shares in the first month of each year. Value is always shares × share price at that moment.
Worked example
With the starting numbers: $10,000 at $50 a share buys 200 shares. The stock pays $2.00 a year in four payments of $0.50, and you add $100 every month.
- By the end of March you’ve made three $100 purchases, so you own 205.98 shares.
- First dividend: 205.98 × $0.50 = $102.99.
- The price has grown to $50.49, so the dividend buys $102.99 ÷ $50.49 = 2.04 shares.
- After a year of this: 232.08 shares at $52.00, worth $12,067.98, after $435.85 in dividends.
- In year 2 the dividend rises 6% to $2.12 a share. By year 20 it is $6.05.
After 20 years you own 1,114.4 shares worth $122,089.37. You put in $34,000, collected $49,618.55 in dividends along the way, and the final year alone pays $6,490.17.
DRIP vs taking cash
Run the same numbers with reinvesting off and the shares end up worth $58,414.52, plus $30,963.93 you received in cash over the years. Add those together and you get about $89,378.45, still well short of $122,089.37. Every reinvested dividend buys shares that pay their own dividends, so the gap widens each year. That is the compounding you see in the green line pulling away from the gold one.
Taking cash isn’t a mistake if you need the income or want to invest it somewhere else. The point is that reinvesting and spending are different plans, and the difference shows up mostly in the later years.
Fractional shares
A dividend rarely divides evenly into whole shares. Most brokers’ DRIPs buy fractional shares, so every cent goes back to work. This calculator does the same. If your broker only buys whole shares, the leftover cash waits in your account and your real result will be a little lower.
DRIPs in taxable accounts
Reinvesting doesn’t delay the tax. In a regular brokerage account, each reinvested dividend counts as income in the year it’s paid, even though you never saw the cash. If you pay that tax from other money, leave the tax rate at 0 here. If you think of it as coming out of the dividend, enter your rate to see the smaller result. The Dividend Tax Calculator works out the rate for your income and filing status.
Tip: keep a record of every reinvestment. Each one raises your cost basis, and that lowers the capital gains tax when you sell. Your broker’s 1099-B usually tracks it, but not for shares you moved from another broker.