# Dividend Reinvestment (DRIP) Calculator

> A dividend reinvestment plan uses each dividend to buy more shares, so the next payment is on a larger holding. With a growing dividend the effect compounds twice: more shares, each paying more. This calculator shows the income and value each year for both choices.

Model: each year's dividend buys shares at the current price; dividend and price grow at their own rates. Example: $10,000 at 3% yield, 8% dividend growth, 25 years.

## Formula
Next year’s income = (shares + dividends ÷ price) × dividend per share × (1 + growth). The model assumes the share price keeps pace with the dividend, so the yield stays constant. Change the price-growth field to relax that.

## Where the compounding comes from
Reinvesting turns each dividend into more shares. If the dividend also grows, next year’s payment is larger for two reasons at once. Over 20 to 25 years that double effect is why the reinvested line pulls so far ahead of the cash line in the table.

## The price assumption
By default the share price is assumed to grow at the same rate as the dividend, so the yield stays constant and reinvested dividends always buy at a fair price. Set price growth lower than dividend growth to model a stock getting cheaper (reinvestment buys more shares, which helps), or higher for one getting more expensive.

## When to take the cash instead
Reinvesting into one company concentrates your money in it. If a holding has become too large a share of your portfolio, or you need the income, take the cash and direct it elsewhere. In a taxable account, reinvested dividends are still taxed in the year they are paid.

## FAQ
**Are reinvested dividends taxed?** In a taxable account, yes: a dividend is income in the year it is paid whether or not it is reinvested. Inside a tax-sheltered account the calculation is the same but with no tax withheld, which is what the 0% default assumes.

**Do I need a broker DRIP to reinvest?** No. A formal DRIP reinvests automatically, often into fractional shares. You can also reinvest manually whenever cash builds up, which lets you pick which holding to add to.

**Why does the cash column also grow?** Because the dividend per share is growing even without extra shares. The gap between the columns is the extra effect of reinvesting.

Use the interactive version at https://foliofundamentals.com/tools/drip-calculator. Related: [DRIP strategy guide](https://foliofundamentals.com/blog/dividend-reinvestment-drip-strategy), [Dividend investing guide](https://foliofundamentals.com/learn/dividend-investing-guide), [CAGR calculator](https://foliofundamentals.com/tools/cagr-calculator).