What Is a Dividend Reinvestment (DRIP) Calculator?
A Dividend Reinvestment Plan (DRIP) automatically uses the cash dividends paid by your investment to buy more shares instead of paying you cash. Over time those extra shares pay their own dividends, which buy even more shares — a compounding snowball. This calculator estimates how much your investment could grow when dividends are reinvested and compares it to simply collecting the dividends as cash.
How to Use It
Enter your initial investment, the expected annual dividend yield (as a percent), the expected annual share-price growth (as a percent), and the number of years. The calculator returns the future value with reinvestment, your total gain, the value if you had not reinvested, and the extra money the DRIP earned you (the "DRIP advantage").
The Formula
With reinvestment, total annual return is the dividend yield plus price growth, compounded each year:
$$FV = P \times (1 + \text{yield} + \text{growth})^{\text{years}}$$
The no-reinvest baseline grows the principal by price growth only and adds simple (uncompounded) dividends: $$P \times (1 + \text{growth})^{\text{years}} + P \times \text{yield} \times \text{years}$$ The DRIP advantage is the difference between the two.
Worked Example
Invest $5,000 at a 4% dividend yield with 6% annual price growth for 10 years. Combined return is 10% per year, so $$FV = 5000 \times 1.10^{10} = \$12{,}968.71$$ Without reinvesting, price-only value is \(5000 \times 1.06^{10} = \$8{,}954.24\) plus simple dividends of \(5000 \times 0.04 \times 10 = \$2{,}000\), totaling $10,954.24. The DRIP advantage is about $2,014.47 — money earned purely by reinvesting.
FAQ
Does this account for taxes? No. Dividends and capital gains may be taxable; results are pre-tax estimates.
Are yields and growth guaranteed? No. They are assumptions you provide; real markets fluctuate. Use conservative figures.
Why is the DRIP advantage so large over time? Reinvested dividends buy shares that themselves pay dividends, so the growth compounds rather than staying flat.
