DRIP Calculator — Dividend Reinvestment

Calculate how your portfolio grows when dividends are automatically reinvested to buy more shares. Model dividend growth and price appreciation over up to 50 years.

Formula

DRIP compounding formula (annual periods)

Year Y Price Initial Price × (1 + Appreciation%)^(Y−1)
Year Y Dividend Initial Dividend × (1 + Growth%)^(Y−1)
New Shares (Shares × Year Y Dividend) ÷ Year Y Price

Model limitations: Annual reinvestment periods (not quarterly). Pre-tax dividends — withholding tax on dividends reduces actual reinvestment. Use for directional planning only.

Worked Example

Given

100 shares · $50/share · $2.00 annual dividend · 20 years · 5% dividend growth · 7% price appreciation

Starting Portfolio Value
100 × $50 = $5,000
Year 1 — New Shares
100 × $2.00 ÷ $50 = 4.00 shares
Year 20 Price
$50 × 1.07¹⁹ ≈ $181.69
Estimated Final Value
≈ $40,000+ (use calculator for exact figure)

Frequently Asked Questions

What is DRIP and how does it work?
A Dividend Reinvestment Plan (DRIP) automatically uses dividend payments to purchase additional shares of the same stock, often without brokerage commissions and sometimes at a small discount. Over time, the additional shares generate their own dividends, creating a compounding effect that significantly accelerates portfolio growth.
Why does this model use annual periods instead of quarterly?
This calculator uses annual reinvestment periods (dividends received and reinvested once per year) as a simplification. Real DRIP programs typically reinvest dividends quarterly at the ex-dividend price. Annual modelling slightly understates the compounding benefit versus true quarterly DRIP — especially over long periods. Use this for directional planning, not precision forecasting.
Are the dividends in this model pre-tax or after-tax?
Pre-tax. The model assumes the full dividend is reinvested. In practice, dividend tax is withheld before reinvestment, which reduces the number of shares purchased. The impact depends on your jurisdiction and marginal dividend tax rate. After-tax DRIP performance will be lower than this calculator shows.
What are realistic dividend growth and price appreciation rates?
For diversified US large-cap dividend stocks, historical annual price appreciation has averaged around 7–9% and dividend growth around 3–7%. High-yield stocks often have lower growth rates; low-yield growth stocks have higher appreciation. Conservative planning uses lower figures (5% price, 3% dividend) to avoid overstating outcomes.
How does DRIP beat holding cash dividends?
Reinvested dividends buy shares that themselves pay dividends in future years. This compounding is mathematically equivalent to paying interest on interest. A 4% initial yield with 6% annual dividend growth reinvested at 8% price appreciation dramatically outperforms the same position where dividends are spent rather than reinvested.