Dividend Reinvestment (DRIP) Calculator

A dividend reinvestment plan automatically uses each dividend to buy more shares — often fractional ones — of the same holding, instead of paying you cash. Many brokerages and companies offer it for free. It keeps your money working without you doing anything, and buys steadily regardless of price.

Over long horizons, substantially. Reinvested dividends compound the share count on top of price growth, and studies of long-run stock returns attribute a large share of total return to reinvested dividends rather than price appreciation alone. The effect grows with time, so starting early matters most.

Yes, in a taxable account. Reinvesting is treated as receiving the cash and then buying shares, so the dividend is taxable in the year paid even though you never saw it. You owe that tax from other funds. In an IRA or 401(k), reinvested dividends grow untaxed until withdrawal.

This year's dividend measured against what you originally paid for the shares, rather than their current price. As a company raises its dividend over the years, the yield on your original cost climbs — a holding bought at a 4% yield might pay 8% or more on cost after a decade of dividend growth.

Not necessarily. Reinvesting concentrates more money into a single holding, which can unbalance a portfolio. Retirees often take dividends as cash for income. And you might prefer to pool dividends and direct them to underweight holdings when rebalancing. Automatic reinvestment is convenient, not always optimal.