acalculator

Is dividend reinvestment worth it?

Enter what you invest, the share price, the dividend yield and how fast the dividend and price grow. See your shares, dividends and value with dividend reinvestment, and without it.

Your numbers

Dividends are paid
Value at the end
$41,539.01

$10,000.00 held for 20 years at a 3% dividend yield ends at about $41,539.01; with every dividend taken as cash, $31,831.02.

You put in
$10,000.00
Total dividends
$14,404.84
Dividends in the last year
$1,406.32
Shares at the end
379.1572
With dividends taken as cash
$31,831.02
Reinvesting adds
$9,707.99
Months
240

Value at the end: $41,539.01. $10,000.00 held for 20 years at a 3% dividend yield ends at about $41,539.01; with every dividend taken as cash, $31,831.02.

How does the holding grow?

How much does it pay in dividends each year?

What does each year look like?

The results are estimates for information only. They are not financial, tax, or legal advice. Check the numbers with your lender or a qualified professional before you decide. Terms of use

How to calculate

Projects a stock or fund holding with its dividends reinvested (DRIP), from the yield, dividend growth, price growth and monthly additions you type, next to taking the dividends as cash.

Example with the default inputs (Starting investment $10,000.00, Share price at the start $50.00, Dividend yield 3%, Dividend growth each year 5%, Share price growth each year 4%, Years 20, Dividends are paid Quarterly, You add $0.00, Reinvest dividends Yes, Tax on dividends 0%): $10,000.00 held for 20 years at a 3% dividend yield ends at about $41,539.01; with every dividend taken as cash, $31,831.02.

Method: Each month the price grows by (1 + price growth)^(1/12). On a payment month the dividend = shares × (start price × yield × (1 + dividend growth)^year ÷ payments a year) × (1 − tax), and with reinvesting it buys dividend ÷ price more shares; the monthly addition buys addition ÷ price shares.

  • The yield, dividend growth and price growth are yours to type and stay the same every year; no live prices or quotes are used.
  • Dividends are reinvested on the payment day at that day’s price, in fractional shares, with no fees.
  • Monthly additions buy shares at the end of each month.
  • Tax, if any, comes out of each dividend before it is reinvested; taxes on selling are not included.

Machine-readable copies: Markdown, JSON.

Worked examples

Each example is checked against the calculator on every build.

  1. Starting investment $10,000.00, Share price at the start $100.00, Dividend yield 4%, Dividend growth each year 0%, Share price growth each year 0%, Years 1, Dividends are paid Quarterly, Reinvest dividends yes gives Shares at the end 104.060401, Value at the end $10,406.04, Total dividends $406.04, With dividends taken as cash $10,400.00, Reinvesting adds $6.04.Source: SEC Investor.gov, "Direct Investment Plans: Buying Stock Directly from the Company" (dividend reinvestment plans) (https://www.investor.gov/introduction-investing/investing-basics/glossary/direct-investment-plans-buying-stock-directly)
  2. Starting investment $10,000.00, Share price at the start $50.00, Dividend yield 3%, Dividend growth each year 0%, Share price growth each year 0%, Years 2, Dividends are paid Yearly, Reinvest dividends no, You add $100.00 gives You put in $12,400.00, Total dividends $702.00, Dividends in the last year $369.00, Value at the end $13,102.00, Shares at the end 248.Source: SEC Investor.gov, "Direct Investment Plans: Buying Stock Directly from the Company" (dividend reinvestment plans) (https://www.investor.gov/introduction-investing/investing-basics/glossary/direct-investment-plans-buying-stock-directly)
  3. Starting investment $10,000.00, Share price at the start $50.00, Dividend yield 3%, Dividend growth each year 5%, Share price growth each year 4%, Years 20, Dividends are paid Quarterly, Reinvest dividends yes gives Value at the end $41,539.01, Shares at the end 379.157241, Total dividends $14,404.84, Dividends in the last year $1,406.32, With dividends taken as cash $31,831.02.

How it works

The calculator runs month by month for the years you choose, with month m = 1, 2, … and year y = 0 for months 1 to 12, 1 for months 13 to 24, and so on.

  • Start. Shares = starting investment ÷ starting price P₀.
  • Price. At the end of each month the price is multiplied by (1 + price growth)^(1/12), so it grows by the price growth each year. The dividend and the addition of that month both buy shares at this price, the price after that month’s growth.
  • Dividend per share. The yearly dividend per share in year y is P₀ × yield × (1 + dividend growth)^y. With f payments a year (12, 4, 2 or 1), each payment is that ÷ f, paid at the end of months 12 ÷ f, 2 × 12 ÷ f, …
  • Dividend. On a payment month, the dividend = shares held at the start of the month × the payment per share × (1 − tax ÷ 100).
  • Reinvesting on: the dividend buys dividend ÷ the price after that month’s growth more shares. Off: the dividend is kept as cash (no interest).
  • Additions. At the end of every month, after the dividend, the monthly addition (a yearly amount ÷ 12) buys addition ÷ the price after that month’s growth shares.
  • Value = shares × price + any cash from dividends.

A second holding runs next to it with every dividend taken as cash, the same start and the same additions. With dividends taken as cash is its value at the end; reinvesting adds = value − that, shown when reinvesting is on.

The results: value at the end, you put in (start + every addition), total dividends (after tax), dividends in the last year (the last 12 months), and shares at the end.

Rules:

  • The starting investment is more than $0 and at most $10 billion; the share price $0.01 to $1 million; the yield 0% to 30%; dividend growth 0% to 30%; price growth −20% to 30%; years 1 to 60; additions $0 to $100 million a month (empty counts as $0); tax 0% to 60% (empty counts as 0%).
  • If the value, or the value with dividends as cash, would pass $1 quadrillion (10¹⁵) in any month, there is no answer.
  • Money shows to the cent with halves rounded up; shares show to 4 decimals.

Assumptions

  • The yield and growth rates you type stay the same every year. No live prices or quotes are used.
  • Dividends buy fractional shares at the payment day’s price, with no fees.
  • Taxes on selling shares are not included.

Worked examples by hand

$10,000 at $100 a share, a 4% yield paid quarterly, no growth, one year, reinvested. 100 shares; each quarter pays 1% ($1 a share), which buys 1% more shares at $100. After four quarters: 100 × 1.01⁴ = 104.060401 shares, worth $10,406.04. Dividends total $406.04. Taken as cash, the value would be 10,000 + 400 = $10,400, so reinvesting adds $6.04.

$10,000 at $50, a 3% yield paid yearly, dividends as cash, $100 added each month for 2 years, no growth. Each addition buys 2 shares. The month-12 dividend is on the 200 + 11 × 2 = 222 shares held at the start of that month: 222 × $1.50 = $333. The month-24 dividend is on 246 shares: $369. You end with 248 shares worth $12,400, plus $702 of cash: $13,102. You put in $12,400.

The default: $10,000 at $50, 3% yield quarterly, 5% dividend growth, 4% price growth, 20 years, reinvested. Month by month, the holding reaches $41,539.01 (379.1572 shares), with $14,404.84 of dividends in total and $1,406.32 in the last year. Taken as cash, it would be $31,831.02.

Other questions people ask

What is dividend reinvestment?

Instead of paying a dividend to you as cash, a dividend reinvestment plan (DRIP) uses it to buy more shares of the same stock or fund. Those new shares earn dividends too, so the dividends compound.

How much difference does reinvesting make?

It grows with time. $10,000 in a stock yielding 3%, with the dividend growing 5% and the price 4% a year, reaches about $41,539 after 20 years with reinvestment, against about $31,831 when the dividends are taken as cash and not invested.

What yield and growth should I use?

Type the numbers for your stock or fund: the yield is the yearly dividend per share divided by the share price. The calculator does not look up prices or dividends, and past growth does not promise future growth.

Are reinvested dividends taxed?

In a taxable account, yes: the IRS treats reinvested dividends as received, so they are taxed in the year they are paid. Enter your dividend tax rate to take it out of each dividend. In an IRA or 401(k), set the tax to 0.

Why does the share price matter if I type a yield?

The share price sets how many shares you hold, and the yield is a percent of the starting price. When the price rises faster than the dividend, each reinvested dividend buys fewer shares.

Does it matter how often dividends are paid?

A little. Monthly or quarterly dividends are reinvested sooner than a yearly one, so they compound a bit faster. The yearly dividend per share is the same; it is split into equal payments.