Dividend Yield & Reinvestment (DRIP) Calculator
Project multi-year compounding stock portfolio value with dividend reinvestment (DRIP), dividend growth rates, and monthly additions.
The Power of Dividend Reinvestment Plans (DRIP)
Dividend Reinvestment Plans (DRIP) automatically utilize cash dividend payouts to purchase additional shares or fractional shares of the issuing stock. DRIP creates a powerful dual compounding engine: you earn compounding capital gains on stock appreciation while accumulating an expanding share base that generates larger future cash dividend payments.
Mathematical Growth with Dividend Yield & Dividend Growth
Total dividend return depends on two variables: 1) Initial Dividend Yield % = (Annual Cash Dividend per Share ÷ Share Price) × 100, and 2) Annual Dividend Growth Rate % (the rate at which companies increase dividend payouts over time). Compounding DRIP portfolios over 10+ years often generates an effective dividend yield-on-cost exceeding 15% to 20%.
How to Use This DRIP Compounding Calculator
Enter initial investment amount ($), share purchase price, dividend yield %, expected annual dividend growth rate %, share price appreciation rate %, holding horizon in years, and recurring monthly contributions. The calculator displays yearly passive income, share growth, total portfolio value, and interactive charts.
Yield Traps and High-Yield Risk Warnings
A frequent trap income investors fall into is chasing abnormally high dividend yields (such as 12% to 15%). Abnormally high yields often signal underlying corporate distress, where a falling stock price inflates the dividend yield ratio right before the board cuts or eliminates the dividend entirely. Target dividend aristocrats with sustainable 3% to 5% yields and steady dividend payout growth.
Frequently Asked Questions
What is DRIP in stock investing?
DRIP stands for Dividend Reinvestment Plan, an automated feature where cash dividends buy additional stock shares automatically.
What is Dividend Yield-on-Cost?
Yield-on-Cost = (Current Annual Cash Dividend per Share ÷ Original Purchase Price per Share) × 100.
Are dividend reinvestments taxable?
In taxable brokerage accounts, reinvested cash dividends are treated as taxable income in the year received.