DRIP Calculator

Use this DRIP calculator to see what reinvesting dividends does to a holding over time. DRIP stands for dividend reinvestment plan: each dividend buys more shares, and those shares earn the next dividend. The calculator runs your holding twice, once with every dividend reinvested and once with the dividends taken as cash, and puts the two side by side after tax.

About the DRIP calculator

Most dividend tools show one growing line and leave you to guess how much of it came from reinvesting. This one answers the question directly: same shares, same contributions, same tax, and the only difference between the two columns is what happens to the dividend.

• Reinvested against cash, side by side. One table, two columns, the same assumptions in both.
• After dividend tax. Reinvested dividends are still taxed in a taxable account. Enter your rate, or 0 for an IRA or 401(k).
• DRIP discount. Some company plans sell reinvested shares below the market price. Enter the discount and see what it adds.
• An income target. Type the yearly dividend income you’re aiming for and the DRIP calculator shows the first year you reach it.
• Year by year. Shares, dividends and both values for every year.
• The working. Every step is written out, so you can check it.

It runs in your browser. Nothing you enter is sent anywhere or saved. It’s a projection from the rates you type, not a forecast and not investment advice.

How to use the DRIP calculator

1. Enter what you hold. The starting investment, the share price, what you’ll add each month, and the number of years.
2. Describe the dividend. The yield and how often it’s paid. The hint under the box shows the dividend in dollars per share.
3. Set your assumptions. How fast you expect the dividend and the share price to grow each year. These are guesses. Try more than one pair.
4. Add tax and plan terms. Your tax rate on dividends, any DRIP discount, and an income target if you have one.
5. Read the two columns. The headline is the reinvested value. The sentence under it gives the cash value and the difference.

What a DRIP is

When a company pays a dividend, you can take it as cash or use it to buy more of the same stock. A dividend reinvestment plan does the second automatically. There are two kinds:

• Broker DRIPs. A setting on a brokerage account. Dividends buy more shares, usually including fractions of a share, at the market price.
• Company DRIPs. Plans run by the company or its transfer agent. Some sell reinvested shares at a discount. The plan prospectus gives the terms.

Either way, the effect is the same. Your share count rises with every payment, so each dividend is paid on more shares than the last.

How the DRIP calculator works

The calculator steps through time one month at a time.

A dividend is paid on the shares you held before that month’s contribution. Tax comes out of the dividend itself in both columns, so they’re compared like for like.

The simplest case, by hand

Put $1,000 into a $10 stock. You have 100 shares. The yield is 5%, paid once a year, so the dividend is $0.50 a share: $50.

• Reinvested: $50 buys 5 shares at $10. You now hold 105 shares.
• With 15% tax: $42.50 is left, which buys 4.25 shares.
• With a 5% DRIP discount and no tax: $50 buys shares at $9.50, so 5.26 shares.

In year 2, the dividend is paid on 105 shares, not 100. If the company raises it 10% to $0.55, that’s $57.75. Repeat that for 20 years and the gap between the columns is the answer you came for.

DRIP calculator example: the default

The calculator opens with these numbers: $10,000 at $50 a share, a 4% yield paid quarterly, 5% dividend growth, 5% share price growth, $100 added each month, 20 years, and 15% tax on dividends.

Reinvesting adds $21,967.11, which is 24.5% more. Look at the last two rows as well. The reinvested holding pays $4,147.09 a year in dividends by year 20. The cash holding pays $2,535.47. If income is the goal, that’s the row to watch.

Here’s how it builds:

After one year the columns are $11 apart. After ten, about $2,800. After twenty, about $22,000. Reinvesting is slow, then it isn’t.

Time is the biggest input

Same assumptions, three lengths:

The benefit of a DRIP grows much faster than the time does: 7.3% after ten years, 52.0% after thirty. If you only plan to hold for a few years, reinvesting matters much less than the price you paid.

Tax: reinvested dividends are still taxed

This is the part people miss. In a taxable account, a reinvested dividend is income in the year it’s paid, the same as one paid in cash. You never see the money, but it’s on your tax form.

Run the default with 0% tax and the reinvested total is $122,527.95. At 15% it’s $111,660.77. Tax costs the reinvested column $10,867.18 over 20 years.

In the US, qualified dividends are taxed at 0%, 15% or 20% depending on your taxable income. Ordinary dividends are taxed at your regular rate, and some investors owe an extra net investment income tax. The thresholds change yearly, so check the current IRS guidance for your rate. In a traditional or Roth IRA, a 401(k) or a similar account, dividends aren’t taxed as they’re paid. Enter 0.

The DRIP calculator takes tax out of the dividend before reinvesting. If you pay the tax from other money and reinvest the full dividend, your shares grow as in the 0% case and the tax is a separate bill.

The DRIP discount

Some company-run plans sell reinvested shares below the market price. A discount works like a small extra yield on every reinvested dollar.

With a 5% discount, the default 20 year total rises from $111,660.77 to $114,787.00. That’s $3,126.23 more for doing nothing extra. Most broker DRIPs have no discount. Only enter one if your plan’s prospectus states it.

High yield or dividend growth?

Two stocks can reach similar totals by different routes. Here are two made-up holdings, each with the default $10,000, $100 a month, 20 years and 15% tax.

Reinvesting matters most for the high yielder, because more of its return arrives as dividends. The low yielder ends with more in total, yet pays far less income. Neither is “better”. They’re different jobs, and both rows rest on growth rates that nobody can promise. A very high yield can also be a sign that the market expects a cut.

Does payment frequency matter?

A little. Dividends paid more often are reinvested sooner.

Monthly beats yearly by about $1,250 over 20 years, roughly 1%. Don’t choose a stock for its payment schedule.

Without monthly contributions

Set the monthly amount to 0 and the DRIP calculator shows a single lump sum left alone. $10,000 becomes $51,178.61 reinvested and $37,775.40 as cash. Reinvesting adds $13,403.21, or 35.5%. The percentage is higher than in the default because nothing else is feeding the holding. All the extra shares come from dividends.

Using the income target

If you’re building toward dividend income, type the yearly amount you want. With the default inputs run for 30 years, dividends first reach $6,000 a year in year 25. That figure is before tax and in future dollars. It isn’t adjusted for inflation, so $6,000 in year 25 buys less than $6,000 today.

Three ways to use the DRIP calculator

Deciding whether to switch a DRIP on. Enter the holding as it stands and compare the columns over the time you expect to hold it. If the gap is small and you could use the cash, you have your answer. If it’s large, the setting is worth the two minutes it takes to change.

Checking a tax-sheltered account against a taxable one. Run the DRIP calculator once at 0% and once at your dividend tax rate. The difference between the two reinvested totals is what holding the same stock in a taxable account costs you. In the default it’s $10,867.18 over 20 years.

Stress-testing an income plan. Set an income target, then cut the dividend growth to 0% and see how many years it pushes the target back. A plan that only works at 8% growth isn’t a plan yet. The DRIP calculator won’t tell you which rate is right, but it shows how much rides on it.

Reading your result

• Total value. Shares times the final share price, plus any dividends kept as cash.
• Dividends received. Before tax, over the whole period.
• Dividends in the final year. What the holding paid in its last twelve months, before tax.
• Yield on what you put in. Final-year dividends divided by everything you contributed. It shows how income has grown against your own money. It isn’t the stock’s current yield.
• Dividends kept as cash. The after-tax dividends in the cash column. They earn nothing here. If you’d spend them, ignore this row. If you’d bank them at interest, the real cash column would end a little higher.

When taking the cash makes sense

A DRIP isn’t always the right setting.

• You need the income. That’s what dividends are for in retirement.
• One holding has grown too large. Reinvesting adds to it. Cash can go elsewhere.
• You’d rather choose what to buy. A DRIP buys the same stock at whatever the price is that day.
• Record keeping. In a taxable account every reinvestment is a purchase with its own cost basis. Brokers track this, but it’s more lines at tax time.

What the DRIP calculator leaves out

• It isn’t a forecast. The growth rates are yours. Dividends get cut and prices fall.
• Smooth growth. Real prices jump around. A DRIP buys more shares when prices are low and fewer when they’re high, which this model can’t show.
• Fees. Some company plans charge them. Most broker DRIPs don’t.
• Inflation. All figures are in future dollars.
• Tax on selling. Only dividend tax is included.
• Whole-share plans. The calculator allows fractions of a share. A plan that doesn’t will lag slightly.
• Interest on cash. The cash column earns nothing.

Related calculators

Planning how much you need invested to stop contributing altogether? The CoastFIRE calculator works that out. If you buy employer shares through a UK scheme, see the share incentive plan calculator. To see what’s left of a paycheck to invest, there are take-home calculators for Washington, Maryland and Indiana.

Method and sources

The arithmetic is compound growth, stepped monthly, as set out in the table above. There are no outside data feeds and no stock prices: every rate is one you enter. US dividend tax treatment is described in IRS Topic No. 404, Dividends, and IRS Publication 550. This page describes general rules and isn’t tax or investment advice.