Compare reinvesting every dividend into more shares with taking the dividends as cash, and see the yearly income each path builds.
Value with dividends reinvested
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Value taking cash (shares plus dividends received)
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Extra from reinvesting
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Yearly income at the end, reinvesting
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Yearly income at the end, taking cash
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Share count growth when reinvesting
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Value with dividends reinvested against taking them as cash
Year by year table
Year
Reinvested
Taking cash
Income (reinvested)
How it works
Reinvesting dividends buys more shares, and those shares pay dividends of their own. Over time the share count grows on its own, on top of any growth in the share price and the dividend.
Taking the cash gives you spending money now but keeps the share count flat. The calculator pays dividends four times a year and grows the dividend once a year.
The formula
Each quarter: Dividend = Shares × Yearly dividend per share ÷ 4
Reinvesting: New shares = Dividend ÷ Share price
Yearly dividend per share grows by the dividend growth rate each year
Worked example
Investing $10,000 in a stock yielding 3%, with the dividend and the price each growing 5% a year, grows to about $47,385 after 20 years with dividends reinvested. Taking the cash instead leaves about $26,533 in shares plus $9,920 of dividends received, about $36,453 in all. The reinvested holding pays about $1,354 a year by the end against $758.
Dividend Reinvestment questions
Does this include taxes on dividends?
No. In a taxable account, dividends are usually taxed in the year they are paid, even when reinvested, which lowers the reinvested result a little.
Where do I find the dividend growth rate?
Look at how much the company raised its dividend each year over the last five or ten years. A conservative figure gives a safer plan.
What is a DRIP?
A dividend reinvestment plan automatically uses each dividend to buy more shares, often including fractional shares, at no commission.
For informational and educational purposes only. Not investment advice, and not a recommendation to buy or sell any security. Results are estimates from the numbers you enter.