Skip to main content

How to Calculate DRIP

What is DRIP?

A Dividend Reinvestment Plan (DRIP) automatically reinvests dividend payments to purchase more shares, generating compounding growth. Even modest dividends reinvested over decades can dramatically increase portfolio size.

Formula

FV = P × (1 + r/n)^(nt) with dividends reinvested at each payment
FV
Future Value ($)
P
Initial Principal ($)
r
Annual Dividend Yield (%)

Step-by-Step Guide

  1. 1Dividends received = Shares × (Price × Yield)
  2. 2New shares purchased = Dividends ÷ Current price
  3. 3Next period: more shares earn more dividends
  4. 4Stock price appreciation adds further to total return

Worked Examples

Input
100 shares at $50, 3% yield, 5% growth, 20 years
Result
Approximately 265 shares worth ~$167 each = $44,000+

Frequently Asked Questions

What is a DRIP?

A Dividend Reinvestment Plan automatically uses dividend payments to buy more shares. This creates a compounding effect that can dramatically amplify returns over decades.

Are there tax implications?

Yes. In taxable accounts, dividends are taxed yearly. In tax-advantaged accounts (IRA, 401k), dividends compound tax-free until withdrawal.

Which stocks offer DRIPs?

Many dividend-paying stocks and mutual funds offer DRIPs. Your broker can typically set this up automatically at no charge.

Ready to calculate? Try the free DRIP Calculator

Try it yourself →

Settings

PrivacyTermsAbout© 2026 PrimeCalcPro