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Dividend Reinvestment (DRIP) Calculator, after tax

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Understanding the dividend reinvestment (DRIP) calculator — concept and principle

A dividend reinvestment plan (DRIP) uses each dividend to buy more shares instead of paying it out as cash. Those new shares then earn dividends of their own, so the holding compounds. This calculator projects a portfolio with yearly contributions, a constant dividend yield, share-price growth and dividend tax, and compares reinvesting with taking the dividends as cash.

Dividend reinvestment loop over 20 yearsEach year 3.5% dividends minus 15% tax (2.975%) buy more shares that grow 5% a year. After 20 years: $229,695 with reinvesting vs $208,106 if dividends were kept as cash.Dividends buy shares that pay dividendssharesprice +5% a yeardividend 3.5%of the value− 15% tax2.975% leftbuy more sharesreinvestedAfter 20 years · $80,000 put in$229,695reinvested$208,106taken as cash+$21,589extra fromreinvesting
Reinvested dividends start earning their own dividends and growth, so the gap widens over time.

How it is calculated

For each year, starting from value V:

  1. After-tax dividend: d = V × yield × (1 − tax rate).
  2. With DRIP: V = V × (1 + price growth) + d + contribution.
  3. Without DRIP: the shares grow by price growth plus the contribution, and the same after-tax dividends as in step 1 are added as cash (no interest).

Contributions are added at the end of each year. The calculator shows the total contributed, the after-tax dividends reinvested, both final values and the extra gained by reinvesting.

The principle

Total return is roughly price growth plus dividend yield. If you reinvest, your money compounds at both: here about 5% + 3.5% × 0.85 = 7.975% a year. If you take cash, only the shares compound at 5%, and the cash sits idle. The gap grows over time because reinvested dividends themselves produce dividends and price growth. Tax drags the result every year, which is why the after-tax yield, not the headline yield, drives the outcome.

Worked example

  1. Inputs: start $20,000, $3,000 a year, yield 3.5%, price growth 5%, tax 15%, 20 years.
  2. Year 1: dividend 20,000 × 0.035 × 0.85 = $595; value 20,000 × 1.05 + 595 + 3,000 = $24,595.
  3. Repeating for 20 years gives $229,695 with DRIP.
  4. Contributed: 20,000 + 3,000 × 20 = $80,000; after-tax dividends reinvested: $55,842.
  5. Without DRIP the shares reach $152,264; adding the $55,842 as cash gives $208,106.
  6. Extra from reinvesting: 229,695 − 208,106 = $21,589.

How to read the result

The extra value is the reward for leaving dividends invested. It is modest in the first years and grows quickly later. It is a conservative figure: the cash scenario is credited with the dividends of the larger DRIP holding. Paid only on its own shares, it would collect about $42,997, end near $195,261 and trail DRIP by about $34,434. If you will need the income, compare the cash scenario's dividend flow with your spending plans.

Common mistakes

Keep in mind: This is a projection with constant rates, not financial advice. Real prices, dividends and tax rules vary.

Frequently asked questions

Is a DRIP better than buying shares myself?

The result is the same if you reinvest promptly; DRIPs just automate it and may allow fractional shares.

Do ETFs reinvest dividends automatically?

Accumulating (total-return) ETFs reinvest inside the fund; distributing ETFs pay cash that you must reinvest yourself.

How much does tax reduce the result?

Set the tax rate to 0 to compare; the difference is the tax drag over the period.

Sources: Z. Bodie, A. Kane, A. J. Marcus, Investments, McGraw-Hill · U.S. SEC, Investor.gov, "Direct Investment Plans"

Checked 8 Nov 2026. Standard financial mathematics (time value of money). Estimates for information only — not financial advice.

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