Dividend Reinvestment (DRIP) Calculator

How to calculate Divident Reinvestment (DRIP) calculator?

The DRIP calculation estimates how reinvesting dividends to buy additional shares increases your compounded returns over time by combining dividend yield with share price growth.

Key formula: combined_growth = (1 + annual_share_price_growth_decimal) * (1 + annual_dividend_yield_decimal) - 1 FV_drip = initial_investment * (1 + combined_growth)^years + additional_annual_investment * ((1 + combined_growth)^years - 1) / combined_growth

Using the Divident Reinvestment (DRIP) calculator calculator: an example

Example values: initial $10,000; dividend yield 3%; annual price growth 7%; 10 years; $1,000 added per year.

Step-by-step calculation:

1. Compute combined annual growth: (1.07) × (1.03) − 1 = 0.1021 → 10.21%.
2. Future value of initial $10,000: 10,000 × (1.1021)^10 ≈ $26,480.
3. Future value of annual $1,000 contributions: $1,000 × ((1.1021^10 − 1) / 0.1021) ≈ $16,140.
4. Total with DRIP ≈ $42,620. For comparison, with 7% price growth only the total ≈ $33,480, giving a DRIP advantage of about $9,140 over 10 years.

Frequently Asked Questions

Does this calculator include taxes and fees?

No. The calculator assumes gross reinvestment and does not factor in taxes, withholding, or brokerage fees; adjust results externally for net returns.

How are periodic dividend payments handled?

The tool uses an annual dividend yield. It assumes dividends are reinvested when paid and compounds effectively on an annual basis; for intra-year granularity use a more detailed model.

How do additional contributions affect long-term results?

Regular additional investments increase the capital that benefits from combined growth and reinvested dividends, substantially boosting long-term compound returns.