Dividend Yield & DRIP Calculator

• Projects dividend income year by year for a stock or fund, with a dividend growth rate separate from price growth.
• Compares reinvesting dividends (DRIP) with taking them as cash, on the same inputs.
• Includes monthly contributions, a tax rate on dividends and the payment schedule (annual, semiannual, quarterly or monthly).
• Shows yield on cost and the current yield, so a rising dividend can be judged against your cost and against the share price.

How to use this calculator

Enter the amount you invest, the dividend yield, how fast the dividend per share grows each year, how fast the share price grows, and the number of years. Switch dividend reinvestment on or off and add a monthly contribution if you plan to keep buying. The results show dividend income in the final year, yield on cost, and the portfolio value.

Under Advanced you can set the tax rate on dividends, the payment schedule, and start from a number of shares and a share price instead of an amount. Use a 0% tax rate for an IRA or 401(k), where dividends are not taxed when paid.

What a DRIP is

A dividend reinvestment plan (DRIP) uses each dividend to buy more shares, usually including fractions of a share, instead of paying cash. Many brokers offer it free on any stock or fund. Over time the share count grows, so each later dividend is paid on more shares. The dividend on a growing share count grows from two sources: the company raising its dividend per share and your additional shares.

The cost of reinvesting is that you never see the cash. In a taxable account the dividend is still taxable income in the year it is paid, and the reinvested amount adds to your cost basis for later gains.

How the numbers are worked out

Dividend per share, year 1 = yield x starting price
Dividend per share, year n = year 1 amount x (1 + dividend growth)^(n - 1)
Share price = starting price x (1 + price growth)^years
Each payment: dividend = shares x dividend per share / payments per year
After tax: net = dividend x (1 - tax rate)
With DRIP: new shares = net / current price
Yield on cost = year's dividends / money you put in

The price grows smoothly through the year and dividends step up once a year. Money you put in counts your starting amount and your contributions but not the dividends you reinvest. Fractional shares are allowed, and there are no trading fees.

A worked example

Suppose you invest $25,000 in a stock that yields 3% and buy 250 shares at $100. The first-year dividend is $757 before tax. The dividend per share grows 6% a year and the price grows 5% a year. You reinvest every dividend, pay 15% tax on each one and add no new money.

After 20 years the dividend income is $3,825 a year before tax ($3,251 after tax), the portfolio is worth $113,863 and you own 429 shares. That is a yield on cost of 15.3%, although the yield on the current value is only 3.4%. Without reinvesting, the same investment pays $2,269 in year 20 and the total value, counting the cash kept, is $89,783 against $113,863 with DRIP. Reinvesting adds $24,080.

Yield on cost: what it tells you and what it hides

Yield on cost divides this year's dividends by what you originally put in. In the example it reaches 15.3%, five times the starting yield. It feels impressive, and it does show how a growing dividend can outpace your original investment. It is not a return. It ignores the fact that the shares are worth far more than the $25,000 you paid, so the money is earning 3.4% on its present value.

A fairer test is to compare the current yield with what the same money could earn elsewhere. A high yield on cost does not show that an investment is better than a competing one with a lower yield. Use it to see how dividend growth builds income, and use the current yield to judge whether the holding still earns its place.

Tax on dividends

Most dividends from US companies and many funds are qualified, taxed at 0%, 15% or 20% depending on taxable income. For 2026 the 0% rate applies up to about $49,450 of taxable income for a single filer and $98,900 for a couple filing jointly, the 20% rate starts above about $545,500 and $613,700, and 15% covers the range between. A 3.8% net investment income tax applies on top at modified adjusted gross income over $200,000 (single) or $250,000 (joint). Dividends from REITs, money-market funds, and some foreign companies, and dividends on shares not held long enough, are usually taxed as ordinary income at a higher rate.

The tax input is a single rate applied to every dividend. In the example, 15% tax means the reinvested amount is 85% of each dividend. Set it to 0% and the portfolio grows to $125,207 instead of $113,863. State income tax, if any, is on top, so a combined rate is a better input for most people.

Adding new money

Dividends are only part of the growth; the largest driver for most people is the amount invested. Adding $500 a month to the example raises the portfolio to $394,816 after 20 years, and the final-year income to $13,134. Contributions are invested at the end of each payment period at that period's price. The money-in figure then includes them, so yield on cost falls to 9.1%: the more you add, the less the original dividend growth matters to that ratio.

Price growth, dividend growth and starting yield

Three rates drive the result. A higher starting yield produces more income at the start; 5% instead of 3% raises year-20 income to $9,010. Faster dividend growth lifts income in later years. Price growth matters for the value of the shares and for how many shares a dividend buys: a stock whose price rises quickly buys fewer shares with each dividend, which slows the compounding of share count but raises the value of the shares you own.

With a flat share price the dividend reinvested buys more shares each time, which is the case where DRIP helps most: the portfolio ends at $63,489 and the final-year income is $5,495. Very high yields deserve caution. A yield above 8% often means the market expects the dividend to be cut or the price to fall, so check how the company has paid in a downturn.

Who this is for, and what it is not

The calculator suits someone holding one dividend stock, a dividend fund or an index fund with a distribution and wanting a rough picture of the income it could grow into. It is a single-holding projection: every share bought grows and pays at the same rates. It is not a model of a diversified portfolio of many stocks, each with its own yield and growth, though an average of their yields and growth rates gives a usable first estimate.

A dividend fund or ETF is worth a closer look at the yield. Distributions can include return of capital and capital-gain distributions that are taxed differently, and the yield shown on a fund page is usually a trailing 12-month figure, which can lag a change in the payout. Use the yield you expect to receive, and do not simply copy the highest number from a screen.

Dividends are part of total return

A dividend is not free money. On the day it is paid, the share price drops by roughly the amount of the dividend, because that cash has left the company. What matters is total return: price change plus dividends. A stock that yields 3% and whose price grows 5% is returning about 8% a year before tax. A stock paying no dividend with the same total return would give the same result if you sold shares to raise cash, apart from tax. Dividends are useful because they give a steady, visible income, and because companies that pay and raise them tend to be profitable and disciplined. They are not a reason on their own to prefer one stock over another.

Over 10 years the same example grows to $52,677. The table in the results lets you check where the dividends turn from a modest sideline into a main source of growth: mostly in the later years, when the share count and the dividend per share are both well above where they started.

A short checklist before you rely on a projection

• Check the company's dividend history, including how it paid in 2008 to 2009 and in 2020.
• Look at the payout ratio. A company paying out almost all its earnings has little room to raise the dividend.
• Compare the yield with the yield on safer options, such as a high-yield savings account or Treasury bills.
• Decide whether the account is taxable, an IRA or a 401(k), and set the tax rate to match.
• Try a lower dividend growth rate and a lower price growth rate to see a cautious case.
• Think about how much of your net worth sits in a single stock.

Choosing between DRIP and cash

Reinvesting is usually the better choice while you are building wealth and do not need the income, since it buys more shares every period without any effort. Taking the dividends as cash makes sense when you need the income to live on, when you prefer to put the money somewhere else, or when you would rather rebalance deliberately than add to the same holding. A DRIP concentrates new money in a single stock or fund, so check it does not skew your overall mix.

The comparison grid shows the total value of both approaches, counting the cash you keep without DRIP, so it is a like-for-like comparison of the two ways to treat the same dividends.

Assumptions and limitations

• Steady growth. The price and dividend grow at the same rates every year. Real prices rise and fall and dividends are cut.
• A single tax rate. Dividends are taxed at the rate you enter, taken from each payment. Tax on capital gains when you sell is not included.
• Taxes come out of the dividend. In the DRIP case only the after-tax amount is reinvested.
• No fees or spreads. Trading costs, fund expenses and advisory fees are not subtracted. Use a lower price growth to reflect them.
• Fractional shares. Real DRIPs allow them at most brokers, but not at all.
• Dividends are not guaranteed. A company can cut or stop paying at any time.
• Not inflation-adjusted. Figures are in future dollars.

Common mistakes

Chasing a high yield. The yield rises when the price falls, which is often a warning.

Reading yield on cost as a return. It compares today's income with an old price.

Forgetting that reinvested dividends are taxed. In a taxable account, you owe tax on dividends you never received in cash.

Letting a DRIP concentrate the portfolio. Reinvesting keeps adding to the same holding. Rebalance if one stock becomes too large.

Assuming dividends always grow. A growth rate of 6% a year for 20 years is an assumption, and many companies have cut dividends in downturns.

Frequently asked questions