DRIP stands for dividend reinvestment plan. At a broker it usually means automatic reinvestment: each dividend payment buys more shares, often at no commission. Companies and funds also run their own plans with the same effect.

Dividend reinvestment calculator

Q: Dividend reinvestment vs cash payout — which is better?

Mechanically, reinvesting leaves you with a larger position, because each dividend buys more shares which then pay their own dividends. Whether that fits you depends on whether you need the income — and on tax, which is charged on the dividend either way in a US taxable account. This is arithmetic, not advice.

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A 3% dividend yield can mean two very different things. Take the cash, or use each payment to buy more shares — a DRIP. The yield is identical; the ending balance is not. This calculator shows the gap between reinvesting dividends and taking them as cash, on the same price path.

Starting money$

Years held 20 years

Price growth (%/yr)(your guess — the point is the gap, not the guess)

Dividend yield (%/yr)0.97% (a broad S&P 500 fund) · 3% · 4.6%3.0%

How to read it: reinvested = every dividend buys more shares. Cash taken = your shares grow at the price growth rate only, and the dividends pile up as cash that earns nothing here. Both use the same growth rate, so the difference is purely what the dividends do after they are paid.

Why reinvesting adds more than the yield

Reinvested dividends do two jobs in sequence. First they buy shares. Then those new shares pay dividends of their own in the following years — which buy more shares. So the gap is not “3% a year”: it is 3% a year on a pot that the dividends themselves keep enlarging. Given 20 years and a steady path, the arithmetic below is what that compounding looks like. The cash-taken column does not lose money; it simply stops participating.

What a DRIP is — and the two different things called DRIP

The term DRIP (dividend reinvestment plan) covers both:

Broker reinvestment. Your brokerage takes each dividend and buys more shares automatically, usually at no commission, often supporting fractional shares. This is what the calculator models.
A company or fund plan. Some issuers run their own reinvestment plan directly with a transfer agent, sometimes at a discount to market price. Same effect on your share count, different mechanics.

One thing the calculator deliberately leaves out: tax. In a US taxable account the dividend is taxable whether you take it as cash or reinvest it — reinvesting defers nothing. Tax treatment is a separate subject, and we do not give tax advice; our ETF vs mutual fund guide covers the mechanism.

What this calculator does not model

Fees. Fund returns are usually quoted net of fees; if you want the fee drag too, use the fee impact calculator.
A real price path. Growth is a single steady rate here. Real prices fall as well as rise, and the order matters.
Cash sitting idle. The “cash taken” column assumes the dividends earn nothing. If you would put them in a savings account, add that rate yourself.

FAQ

What does a dividend reinvestment calculator do?

It compares two ways of taking the same dividend yield on the same price path: reinvesting each payment (a DRIP, so you buy more shares) versus taking it as cash. Reinvesting compounds the dividends themselves, so the ending balance is higher — the calculator shows by how much.

Dividend reinvestment vs cash payout — which is better?

Mechanically, reinvesting leaves you with a bigger position, because each dividend buys shares that then pay their own dividends. Whether that suits you depends on whether you need the income now — and on tax, which is charged on the dividend either way in a US taxable account. This page is arithmetic, not advice.

Does reinvesting dividends increase returns?

It increases your ending balance on the same investment path, because the dividends start compounding too. The yield itself does not change, and nothing here is a forecast.

Is “dividend reinvestment” the same as compounding?

They are related but not the same word. Reinvestment is the action (buying more shares with the dividend); compounding is the result (growth on growth). Reinvesting is one way to let compounding work on the dividend part of your return.

See it on real funds — how each one pays and what it returned after fees: open SeeFund.

More: Guide: dividends reinvested — how we count them · Fee impact calculator · Lump sum vs dollar cost averaging · All tools