DRIP Calculator (Dividend Reinvestment)
See exactly how much more money you make by reinvesting your dividends instead of taking them as cash. The snowball effect is real.
What is DRIP (Dividend Reinvestment)?
DRIP stands for Dividend Reinvestment Plan. Instead of receiving your dividend payments as cash, DRIP automatically uses those dividends to buy more shares of the same stock. This creates a powerful compounding effect — you earn dividends on your dividends.
How This Calculator Works
This calculator models two scenarios side by side:
- With DRIP: All dividend payments are reinvested to purchase additional shares at the current price. Your share count grows every year.
- Without DRIP: Dividend payments are taken as cash and set aside (not reinvested). Your share count only grows from new contributions.
Both scenarios include the same monthly contributions and stock price appreciation. The only difference is what happens to the dividends.
The Snowball Effect
In year 1, the difference between DRIP and no-DRIP is tiny. But each year, those reinvested dividends buy more shares, which generate more dividends, which buy even more shares. After 10-20 years, the gap becomes enormous. That's the snowball effect — and it's why long-term dividend investors swear by DRIP.
Best Stocks for DRIP Investing
- Realty Income (O) — Monthly dividend payer, ~4.9% yield. A favorite among DRIP investors.
- Coca-Cola (KO) — 60+ years of consecutive dividend increases. The ultimate Dividend King.
- Verizon (VZ) — High yield (~5.3%) with steady cash flows from telecom operations.
- SCHD ETF — Diversified dividend ETF with 100+ quality dividend stocks. Great for beginners.
DRIP vs Taking Cash Dividends
Taking cash dividends makes sense if you need the income now (retirees, for example). But if you're building wealth for the future, DRIP almost always wins. The math is simple: more shares = more dividends = more shares. It's exponential growth powered by patience.
Limitations
This calculator assumes a constant dividend yield and constant annual price appreciation. Real-world results will vary — stock prices fluctuate, companies can cut dividends, and taxes apply to dividend income even when reinvested. Use this as a planning tool to understand the power of compounding, not as a guarantee of returns.