DRIP Calculator (Dividend Reinvestment)
Enter a starting portfolio, yield, and growth rates. Compare letting dividends reinvest against spending them — the gap after 20 years surprises everyone.
| Taking dividends as cash: portfolio | — |
| + cash dividends collected | — |
| DRIP advantage | — |
| Income the DRIP portfolio pays at the end | — |
Why reinvested dividends compound so hard
Reinvested dividends buy shares, which pay dividends, which buy shares — a second compounding engine on top of price growth. $100,000 at a 3% yield with 5% price growth: after 20 years the DRIP portfolio reaches about $470,000, while taking cash leaves ~$265,000 of portfolio plus ~$100,000 of collected dividends. The reinvestor ends roughly $100,000 wealthier from the identical investment.
DRIP return ≈ price growth + yield, compounded together
Historically, reinvested dividends account for a large share of total US stock market returns — the S&P 500 price index alone dramatically understates what investors actually earned.
When to DRIP and when to take cash
- Accumulation years: reinvest, always — usually one checkbox at the broker, fractional shares included, zero effort.
- Retirement: switching dividends to cash creates spending money without sell decisions.
- Taxable accounts: dividends are taxed in the year paid whether reinvested or not — DRIP does not defer tax, it just keeps money working.
- Concentration check: DRIPing a single stock for decades quietly builds an oversized position; funds avoid this.
Frequently asked questions
What is a DRIP?
A dividend reinvestment plan — dividends automatically buy more shares (including fractions) instead of arriving as cash. Most brokers offer it as a free account setting.
How much difference does reinvesting dividends make?
On $100,000 at 3% yield and 5% growth over 20 years: roughly $470,000 reinvested vs $365,000 total taking cash — about $100,000 of extra wealth from the same investment.
Are reinvested dividends taxed?
Yes — in taxable accounts they are taxable income in the year paid, reinvested or not. Each reinvestment also adds a tax lot to track (brokers do this automatically now).
Should retirees stop reinvesting?
Commonly yes — turning the dividend stream into cash income avoids selling shares in down markets. Many retirees flip the DRIP switch off the year they retire.
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Last updated: 2026-07-08