Dividend Reinvestment (DRIP) Calculator
Portfolio value with dividends reinvested versus taken as income, dividends received, final-year income and yield on cost, with monthly contributions, dividend growth and withholding tax.
| Total contributed | — |
|---|---|
| Dividends received over the period | — |
| Annual dividend income in the final year | — |
| Yield on cost in the final year | — |
| Reinvested vs taken as income | — |
| Share of growth from dividends | — |
Every 5 years
In short
Reinvested dividends buy more shares that pay dividends themselves, so income compounds on top of price growth. 20,000 plus 300 a month at a 3.5% yield growing 5% with 4% price growth reaches about 257,000 in 20 years with dividends reinvested, against 153,000 plus 59,000 of income if taken; final-year dividends are about 9,800, a 10.7% yield on cost.
Who this is for: Income investors and anyone deciding whether to reinvest or take dividends.
Why reinvested dividends dominate long-run returns
- Each year the portfolio pays yield × value in dividends; reinvested, they buy more shares that pay dividends themselves — compounding on top of price growth.
- Dividend growth matters more than starting yield over long periods: a 3% yield growing 7% a year overtakes a flat 5% yield in about 14 years of income.
- Yield on cost — this year's dividend ÷ what you paid — is how income investors measure progress; it rises every year the dividend grows.
- Withholding tax (15–30% on foreign shares for many investors) comes off before reinvestment; tax-sheltered accounts avoid it.
- The model uses annual compounding and a steady growth path; real dividends get cut in recessions and prices are volatile.
See also: ROI & CAGR Calculator, Investment Fee Calculator.
Assumptions
- Annual steps: dividend = value × yield × (1 − tax); price grows at the price rate; dividend reinvested (or paid out); contributions added with half-year growth.
- Yield on price drifts by (1 + dividend growth) ÷ (1 + price growth) each year so dividend income grows at the dividend rate.
- Comparison reruns with the opposite reinvestment choice and with no dividends at all.
Worked example
Final portfolio about 257,000 from 92,000 contributed; about 82,000 of dividends reinvested along the way. Final-year dividend income about 9,800 (a 10.7% yield on cost). Taking the dividends instead would leave a portfolio of about 153,000 plus 59,000 of income received — reinvesting ends about 45,000 ahead. Dividends account for roughly 40% of the final value.
Frequently asked questions
What is a DRIP?
A dividend reinvestment plan automatically uses each dividend to buy more shares, often fee-free and in fractions; the calculator models the same effect.
Is it better to reinvest dividends or take them?
Reinvest while you are accumulating; take them when you need the income. Reinvested dividends have historically supplied around 40% of long-run equity returns.
What is yield on cost?
Current annual dividend divided by the original purchase price — it shows how a growing dividend turns a modest starting yield into a large one over time.
Does this work for dividend ETFs and REITs?
Yes — enter the fund's distribution yield and its expected growth; REIT dividends are often taxed at higher rates, so use the tax field.
What is a good dividend yield?
2–4% for quality dividend growers; yields above 7% often signal a cut ahead.
How are dividends taxed?
It varies: withholding of 15–30% on foreign shares for many investors, lower rates in tax-sheltered accounts, none in the UAE and KSA for residents.
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