How to use the dividend reinvestment calculator
- Enter your Initial investment ($) and any Annual contribution ($) you plan to add at the start of each year.
- Enter the Starting dividend yield (%): the yearly dividend divided by the share price today.
- Set Dividend growth (% a year) and Share price growth (% a year), then choose the Years to grow.
- Read the portfolio value and dividend income, compare reinvesting with taking cash, and open the year-by-year table.
How the projection works
The tool tracks shares, not just dollars. Each year you add your contribution at the start, the share price grows, and dividends are paid at year end on every share you hold, then reinvested at the year-end price. Because yield is dividend per share divided by price, it moves with the gap between the two growth rates.
Yield in year t = Starting yield x ((1 + dividend growth) / (1 + price growth))^(t - 1)
Dividends = Value at start of year x Yield
Value at end of year = Value at start x (1 + price growth) + Dividends
Treating dividend growth as growth in the yield itself would count price growth twice, so this model does not. Figures are pre-tax and assume steady rates, which real markets never deliver.
Worked example with the default numbers
In year 1 you hold $10,000 + $2,400 = $12,400. At a 3% yield it pays $372.00, and the portfolio ends the year at $12,400 x 1.05 + $372 = $13,392.00. Repeating this for 20 years gives $173,024.13. You put in $58,000.00, so growth and reinvested dividends add $115,024.13. Year 20 pays $5,723.28 in dividends, about $476.94 a month, and the yield on price has drifted from 3.00% to 3.59%. Taking the dividends as cash instead leaves a $109,859.18 portfolio plus $35,094.66 of cash, $28,070.28 less than reinvesting.
Limits and edge cases
- Dividends can be cut and yields rarely rise forever. Test a lower dividend growth rate, and treat a yield above 6 to 7% as a warning sign rather than a bargain.
- Payments are annual, while most US stocks pay quarterly, so the results are a close approximation. Fees, taxes and price volatility are ignored.
- In a taxable account, dividends are taxed in the year they are paid, even when reinvested. For 2026, qualified dividends are taxed at 0% up to $49,450 of taxable income for single filers ($98,900 married filing jointly), 15% up to $545,500 ($613,700) and 20% above. To qualify, you generally must hold common stock more than 60 days during the 121-day period around the ex-dividend date. Other dividends are taxed as ordinary income. Roth IRAs avoid the tax, while traditional IRAs and 401(k)s defer it.
- To track a single trade, use the stock profit calculator. For a plain growth rate with no dividends, try the compound interest calculator, and to model a retirement account with an employer match, the 401(k) calculator.
Dividend questions people ask
How is dividend income calculated?
Annual dividend income equals portfolio value times dividend yield. A $10,000 portfolio yielding 3% pays $300 a year, or $25 a month.
What does DRIP mean?
A dividend reinvestment plan uses each dividend to buy more shares automatically, so later dividends are paid on a growing number of shares.
Are high-yield stocks better?
Not always. Yields above 6 to 7% often signal a company in trouble. Look for payout ratios under about 60% and a record of dividend growth.
Are reinvested dividends taxed?
Yes, in a taxable account they are taxed in the year they are paid, even though you never received the cash. In a Roth IRA they are not taxed, and in a traditional IRA or 401(k) the tax is deferred until you withdraw.
How much do I need invested to earn $1,000 a month in dividends?
Divide $12,000 a year by the yield. At a 3% yield you need about $400,000, and at 4% about $300,000.
Sources: Internal Revenue Service, Publication 550, Investment Income and Expenses (qualified dividends and holding period); Topic 404, Dividends; Rev. Proc. 2025-32 (2026 thresholds).