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DRIP Calculator Guide
A DRIP — dividend reinvestment plan — uses each dividend to buy more shares automatically. Those shares pay dividends too, which buy more shares. This projects where that ends up.
Each period: new shares = (shares × dividend per share) ÷ current price
Then shares grow, price grows, dividend grows, and it repeats.
100 shares at $50 paying $0.50 quarterly becomes about 104.06 shares after one year with no growth at all.
Why the Curve Bends Upward
Three things compound at once, which is what makes long DRIP projections look almost implausible.
Your share count grows. The dividend per share grows. The price grows. Each feeds the others — more shares means bigger dividends, which buy more shares, which collect the next raise as well. Nothing dramatic happens for five years. The interesting part is entirely in the back half, which is also the part that requires you to do nothing for twenty years.
Falling Prices Help — Genuinely
This is the counterintuitive bit. If the price drops while you're reinvesting, each dividend buys more shares. Assuming the business is sound and the dividend holds, a long bear market in the accumulation phase produces a bigger share count and more income later.
The condition matters, though. This only works if the dividend survives. If the price fell because the company is failing, you're reinvesting into the failure, and the same mechanism that compounds gains compounds the mistake.
Growth Assumptions Are Doing All the Work
Set price growth and dividend growth to 5% each and twenty years looks wonderful. That is a projection, not a forecast. Real dividends get cut, real prices fall for years, and the companies that raised dividends for the last two decades are not automatically the ones that will do it for the next two.
Run it with 0% growth to see what the arithmetic gives you with no assumptions attached. That's the honest floor.
Tax and Fractional Shares
In a taxable account, reinvested dividends are usually taxable in the year they're paid even though you never saw the cash — so you can owe tax on money that's now shares. Each reinvestment also creates a separate cost-basis lot, which becomes a genuine record-keeping problem after a decade. Most brokers now support fractional shares, which this calculator assumes; if yours doesn't, dividends may sit as cash until they clear a whole share.
Related: dividend calculator, dividend yield calculator, compound interest calculator.
These results are estimates for education and planning, not financial advice. Actual returns, rates, and terms vary — check with a qualified professional before making decisions.
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