DRIP Calculator

Reinvested dividends buy additional shares, and those shares then earn both price growth and their own future dividends. That layering — dividends buying shares that pay more dividends — is compounding. The effect is small in any single year but grows substantially over long holding periods and at higher yields.

It depends on your goal. Reinvesting maximises long-term growth because every payout is put back to work. Taking dividends as cash gives you income to spend, which suits retirees or anyone who needs the cashflow. This calculator shows both paths side by side — both keep the same price appreciation, so the gap you see is purely the value of reinvesting.

Because at a 2% dividend yield, price appreciation does most of the heavy lifting — the dividends being reinvested are a small slice of the total return. DRIP's edge grows with the dividend yield and the holding period: it is modest for a low-yield growth stock and far larger for a high-yield holding compounded over decades. Some calculators overstate the gap by quietly dropping price appreciation from the no-DRIP path, which is not how it actually works.

In most jurisdictions, yes — a reinvested dividend is generally taxed in the year it is paid, exactly as if you had received the cash, even though you never saw it. This calculator models gross returns only; your actual after-tax result will be lower. Tax rules vary by country and account type, so check your local rules or a tax adviser.

XIRR is the annualised internal rate of return that accounts for the timing of every cashflow — your initial lumpsum on day one, each monthly contribution on its own date, and the final value at the end. It is the single yearly rate that ties all those dated flows together, so it is the fairest way to compare the DRIP and no-DRIP paths on a like-for-like basis.